Home.co.uk
Home.co.uk

News: News Round Up - Glimmer Of Hope Fades Amid Housing Market Gloom

Fri, 04 Jul 08

 

It came with some degree of surprise that the Royal Institute of Chartered Surveyor’s spokesman Jeremy Leaf declared on BBC Radio 4 that the housing market has been offered a “glimmer of hope” following the Nationwide’s latest house price figures.

Released on Tuesday the figures showed that for June the drop in prices was 0.9%, far less than the mammoth 2.5% decrease seen in May - see Home.co.uk, 1 Jul 2008.

While the figures certainly hint at a slowing down in the house price descent there was precious little comfort to be found in the rest of the Nationwide’s figures.

Over the last three months prices dropped by 3.45% and over the year by 4%.

The average homes is now worth just £174,514, £13,629 cheaper than the peak of the market last October and £11,500 less than at the same time in 2007.

A glimmer of hope was certainly not how homeowners in Northern Ireland perceived the figures. Prices in the area have slumped by a massive 9% from April to June and by 18% since last year.

There was little comfort for those in London and the south east either, where homeowners have enjoyed some of the UK’s most obscene house price rises over the last decade.

Prices in the capital fell by 3.8% from April to June, says the Nationwide.

A series of announcements from the Bank of England this week have heaped further scorn on any suggestion of a light at the end of the tunnel of house price decreases.

On Monday the Bank of England announced that mortgage approvals were down 42,000 in May, a whopping 28% fall on April’s figures and down 64% on the same period in 2007. 

Its latest survey of banks found that just under half have already reduced their mortgage lending over the last three months and one in five are set to make fewer products available in the near future - see Channel 4, 2 Jul 2008.

The Bank of England also announced that housing equity withdrawal is now at a seven year low. This is where homeowners took advantage of double digit house price growth over the last decade to take out larger mortgages.

The good times are certainly over as homeowners and first time buyers have little chance of meeting increasingly punitive demands from mortgage lenders.

High arrangement fees are a major factor in the difficulties facing those seeking a mortgage, according to the Government, with the Chancellor Alistair Darling ordering lenders to reduce them or face the wrath of the Financial Services Authority.

In its monthly statement on the state of the housing market released this week the Council of Mortgage Lenders said high fees are here to stay unless the Government does more to help borrowers meet their mortgage costs - see Home.co.uk, 2 Jul 2008.

Among the CML’s demands is reform of income support to ensure claimants get timely financial assistance in meeting mortgage interest payments. Currently many face a wait of nine months or more.

If a glimmer of hope was to be found anywhere it was in the Land Registry’s figures, released on Monday. This showed that prices were unchanged in May and up 1.8% over the year.

But taking into account inflation this is still a drop in prices in real terms over the year. The BBC pointed out the figures presented a  “far more rosy picture” of the housing market than information from lenders such as Nationwide.

A further glimmer of hope is that many of those who bought during or before 2004 may be safe from negative equity.

Many of these pre-2005 purchases have the luxury of an equity buffer of 48%, according to analysis by GE Money Home Lending.

GE Money predicts that house prices would need to fall by 20% for negative equity to hit the average pre-2005 home purchaser.

But with prices already falling by around 18% in Northern Ireland, how long will it be before house price drops fall to a fully fledged crash and the RICS’s glimmer of hope finally fades?

 

Back to: News Index