Time to buy index for September 2008

In September the index stands at 361 unadjusted(U) and 457 adjusted(A)

This gives a guide that house prices are around 36% over valued and that market sentiment pushes that to 45% over valued. DO NOT BUY

That is not to say that house prices will fall by either, but it gives an idea of the direction.

House prices have fallen this month which initially reduced the index. But residential fixed rates increased and buy to let rates increased significantly, which pushed the index up for the first time since June 2008.

With many buy to let deals being withdrawn this month and those that remain seeing large increases to the rates, the demand for property from this market is dropping fast.

The unadjusted index is now down from it's peak of 645 in July 2007

PREDICTION

House prices to continue falling with the Halifax index bottoming at £140,000 in Q4 2009.

In my opinion mortgage lending criteria has pretty much returned to normal even though lenders are still lending above average multipliers and mortgage rates have again returned to a longer term normal level.

The ongoing financial crisis may lead to a collapse of the banking system and society as we know it. Assuming this does not happen, then lenders will never be returning to the days of lending with no deposit or income checks.

House prices are still suspended about 20% above the level of finance that the banks are willing to give out.

Buy to let as one of the key drivers of house prices still does not makes economic sense at current rates. This sector will most likely never return to the heady days of 2007 as the age of irresponsible lending is over.