As the UK economy continues to experience a deepening recession, what would be necessary for the UK housing market to recover?

Higher willingness to lend. Interest rates are very low, so the cost of mortgages should not be a problem. Some fixed rate mortgages are going for as low as 3%. The problem is banks are still reluctant to lend mortgages because of the shortage of their cash flow. Some banks even complain that low interest rates make it difficult to attract savers and therefore have enough to lend.

Affordability. With house prices falling fast (10-15%) it means they are becoming more affordable for first time buyers. Buying a house looks more attractive than it was 18 months ago. As house prices continue to fall, it will start to tempt more people back into the housing market. Another key issue is the affordability of housing compared to renting a house.

End of Recession With unemployment forecast to rise to 3 million because of deepening recession, many people will be deterred from buying a house in current climate of uncertainty. It is hard to imagine housing market picking up with output continuing to fall and unemployment rising. Unemployment is often a lagging indicator which means unemployment could still rise when economy first starts to pick up. But, when the economy starts to pick up, this may give the confidence necessary to potential home owners.

Housing Market Recovery by 2010?

In the last housing market downturn, house prices fell for about 4 years. This means we might not see a housing recovery until 2011. However, conditions are different and it is hard to predict how long house prices will continue to fall