Because...

...less equity released by those downsizing or remortgaging, which cuts consumer spending and growth.

...mortgage LTVs will tighten making it harder for people to get a mortgage.

...mortgage rates will rise as lenders will price in the risk of further falls, both making it harder for people to move (affordability) and mean less disposable income so less consumer spending and less growth.

...lenders will screen out riskier borrowers to minimise defaults and crystallising any negative equity, making it harder for FTBs and others to get a mortgage.

...as fewer people will be getting mortgages, demand for rental property increase and rents go up.

...generally it will knock confidence in the economy and lead to people spending less, so less growth.

...banks will find it harder to raise finance off the back of their mortgage portfolio (as it's worth less) so there is less money for them to lend out to consumers who therefore spend less, so less growth.

And those are just off the top of my head.

It seems counter intuitive after first, but falling prices screw FTB ers as they are riskier borrowers, and in a falling market banks don't like risk. So it's harder to actually get a mortgage. They are only a good thing if you are lucky enough to be able to time a purchase when prices hit the bottom of the curve and start to rise again.

They are a boon to property speculators as cash is king, and more people renting through not getting mortgages makes BTL a good bet.

We tried moving just after the 08 crisis and it was brutal. And off the back of that crisis, mortgages (quite rightly) became harder to get, to the point that my current lender wouldn't even match my existing mortgage when we tried moving.

Posted By: CWC, Jun 2, 23:29:44