The annual rate of house price growth fell in January, according to the latest Nationwide house price survey, prompting claims that unsecured loans figures could drop accordingly.
Year-on-year inflation in the value of property stood at 4.2 per cent, a decrease of 0.6 percentage points from December. Monthly declines were less significant, but the average property was down by 0.1 per cent in value over the course of the month, compared with a 0.4 per cent drop in the last month of 2007. House prices in general are now at a similar level to that of April last year, the figures show, having dropped by nearly 6,000 pounds since their peak in October. The number of loans approved for house purchases has also fallen, with the Bank of England reporting that 73,000 secured loans were taken out by homebuyers in December.
This is the lowest figure since July 1995 and prompted shadow chief secretary to the Treasury Philip Hammond to accuse prime minister and former chancellor of the exchequer Gordon Brown of "economic incompetence". He said: "The collapse in mortgage lending shows that the credit crunch in the financial markets is now having a serious effect on the real economy, depressing housing market activity and house prices. Gordon Brown's economic incompetence has left Britain less well prepared than almost any other large economy to deal with an economic slowdown."
Vicky Redwood, UK economist at Capital Economics, adds that household lending figures for December further indicate the effects of the credit crunch, explaining that "a particularly heavy fall" was detected in the number of personal loans and overdrafts being taken out. Total consumer credit - including that on credit cards and unsecured loans - exhibited a monthly growth rate of 0.6 billion pounds, down by 40 per cent on the average monthly increase of 1 billion pounds over the previous year. Just 0.3 billion pounds of unsecured loans and overdrafts were arranged in the month, less than a quarter of the 1.4 billion pounds taken out in October 2007.
Commenting on data from the Royal Institution of Chartered Surveyors which shows the supply of properties in the market and the number of Britons looking to purchase a new house are more in balance than has been the case in previous months, Ms Redwood observes that "tighter credit conditions are starting to bite". Consumers looking to meet their mortgage repayments, as well as those hoping to clear the balance on their credit cards, could find an unsecured loan to be the ideal means of doing so. Alternatively, those who have already borrowed beyond their level of affordability might prefer to opt for a debt consolidation loan to combine the amount they owe into a single lower monthly repayment.
Taking out a personal loan might be particularly useful for the 91 per cent of people revealed in a recent swiftcover survey to have regretted making an impulse purchase in the last two months. One in six respondents stated that they impulse buy at least once a month, which could lead them to face difficulty in meeting repayments on their mortgage, credit card or unsecured loan.
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