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Property bubble to burst and expose misselling of self-cert

House prices will fall by 30 per cent within two years, resulting in widespread allegations of misselling throughout the mortgage market, says investment bank Durlacher.

The report&#39s author, analyst David Pannell, believes that the predicted downturn in the housing market will result in mortgage lending falling by more than half and will bring a flood of allegations of misselling.

Self-cert mortgages are tipped as highest risk as brokers will be unable to prove they gave best advice but Pannell also expects that protection products will be a problem. He suspects that clients have been churned into lower-priced life insurance with worse exclusion terms than the original policy.

Equity release is labelled by the report as “an almost mandatory misselling scandal”.

Pannell is also wary about buy to let, saying he would be surprised if all the specialist lenders survive a market downturn and that the sector is more dangerous than its small share of the overall market would indicate.

He says the four factors that will turn the housing market are tightening of underwriting criteria from lenders, decreasing financial attractions of buy to let, continued increase in interest rates and the onset of mortgage regulation which he believes will be more disruptive than expected.

The forecast is based on the fact that a 30 per cent fall in house prices would return prices to their 30-year trend line.

Pannell says: “We believe the market now has the classic features of a bubble because prices have become divorced from the underlying asset. The probability that prices will fall by more than 30 per cent is high because, historically, house price corrections tend to overshoot.

“In the 1980s, real house prices needed to fall by 26 per cent to hit trend but actually dropped by 37 per cent. If this level of over-correction were repeated during this cycle, prices would fall by 44 per cent.”


House prices may fall 45 per cent – Durlacher

Market analyst Durlacher predicts that UK house prices will fall by 30 per cent from their peak, and says the fall could be as much as 45 per cent. It says a tightening of lending criteria from lenders, combined with a decline in yield from buy to let, a predicted rise in interest rates and […]

Thomson&#39s set for name change in Euro push

IFA Thomson&#39s Group may adopt the name of its German parent AWD Holding as part of its bid to become the UK&#39s leading European IFA. The group is believed to be considering the name change which would not necessarily see the Thomson&#39s name disappear entirely but would give a better indication of its attachment to […]

Claims against Aaron could hit £12

The David Aaron Partnership could be facing a £12.6m bill for misselling claims, more than six times the £1.8m it had put aside for compensation before it went bust last December. Based on documentation from accountants KPMG, the troubled IFA firm had reportedly calculated its initial liability on the basis of 200 claims averaging £9,000 […]

Those were the daze

It was a slow Valentine&#39s Day for the Diary. There was the odd rose sent in by admiring readers but unfortunately the Diary was desperate and dateless. So desperate, that reading back issues of Money Marketing was as exciting as it got. And back in the very first issue of MM in September of 1985 […]


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