THE housing sector should stand firm despite the recent stock market turbulence, analysts said yesterday. Economists said the recent volatility was unlikely to affect residential property prices, as the UK economy still remained strong and unemployment was low.

But the crisis in the US sub-prime mortgage market is likely to have an impact on mortgage rates in this country, although contrary to popular opinion, it could lead to lower rates rather than higher ones.

Martin Ellis, Halifax chief economist, said, “I don’t think the stock market falls will have much of an impact on the housing market. The economic fundamentals are still very strong, the economy is doing well and unemployment is still very low. If you look back to the stock market crash of 1987, the housing market remained strong and continued to be so into 1988.”

He added that following the stock market fall in 2001, people were reluctant to invest in shares, with many instead turning to buy-to-let. He said if this happened again it may even give the market a boost.

Andy Wiggans, mortgage director at Bradford & Bingley, agreed adding: “What is going on at the moment is a fairly short-term issue. It would need to be a much longer-term mood to have an affect on the housing market as a whole.”

He said individual lenders, particularly those reliant on wholesale funding, would have to change their rates, but overall there was unlikely to be a big impact on the property market.
Swap rates, which are what mortgage lenders base their fixed rate deals on, are linked to gilt yields, so these have also fallen since the FTSE crash, dropping by around 0.25% in the past couple of weeks. As a result, some lenders have already re-priced their two-year fixed rate deals, with these falling by between 0.1% and 0.15%, and more lenders are likely to reduce their short-term fixed rate deals going forward.