Sat, 27 Feb 10
The cold snap and a rush to beat the end of the stamp duty holiday caused a dip in mortgage lending and house prices at the start of 2010, according to latest figures.
Figures released this week by the British Bankers’ Association figures show that high street banks only agreed 35,000 new mortgages in January, down from 46,000 in December.
The figures also reveal that the value of mortgage lending in January fell to £8bn, which is the lowest monthly amount for more than eight years – see Home News 24 Feb 2010.
The BBA lays the blame squarely at the end of the stamp duty holiday for homes worth between £125,00 and £175,000 at the end of last year and the severe cold weather snap.
David Dooks, the BBA’s statistics director, said: “It was no surprise to see the January mortgage figures falling back from December, when transactions were being pushed through to beat the end of stamp duty relief.”
David Whittaker, managing director of Mortgages For Business, added: “I’m actually quite surprised at how well the mortgage lending figures have stood up. With January heralding the end of the stamp duty holiday and weather conditions that Vancouver can only dream of at the moment we fully expected the figures to be even lower.”
The icy weather and the end of the stamp duty holiday have also been blamed for a fall in prices.
Latest Nationwide building society figures show that property prices fell by 1% between January and February, putting the price of an average home according to the Nationwide at £161,320.
This is the first monthly fall in the Nationwide’s house price index for 10 months.
However, a closer look at the figures reveals that house prices are still 9.2% higher than a year ago.
Also prices were still 1.6% up in the three months to February compared to the previous three months.
The Nationwide has said it is too early to tell whether the fall in prices in February is a temporary blip or part of a downward trend.
Martin Gahbauer, the Nationwide’s chief economist, said: “There is evidence from a range of indicators that the market may have lost momentum in early 2010 as the stamp duty holiday ended and house hunters were obstructed by the icy weather.
"Even without the impact of stamp duty changes and the snowy weather, it would have been surprising to see house prices maintain the very strong upward momentum seen for most of 2009."
According to Home.co.uk asking prices for homes on the market in England and Wales fell by 0.3% during the month leading up to its February Asking Price Index report.
Latest lending figures for the final quarter of 2009, released this week by the Council of Mortgage Lenders, show the extent to which the stamp duty holiday buoyed the market at the tail end of last year – see Home News 24 Feb 2010.
The figures show that the number of loans for home purchases rose by 9% across the UK between the fourth and third quarters of 2009. These latest CML figures also show that the housing market in Scotland is recovering, although at a slower rate of 4% during the same period.
Remortgage activity in Scotland and the rest of the UK continues to remain low. There were 9,000 remortgage loans agreed in the fourth quarter, down from 10,000 during the previous three months and markedly down on the final three months of 2008 when 16,000 remortgages were agreed.
CML Scotland policy consultant Kennedy Foster said: “We do not anticipate an increase in lending activity immediately. Funding conditions remain challenging, economic recovery is fragile both in Scotland and in the UK as a whole, and with little likelihood of interest rates rising this side of an election, many on low variable rates have little incentive to remortgage.
“A combination of bad weather in the early part of the year and the end of the stamp duty holiday will also have affected housing market activity, and will reinforce the slow start to 2010. However, the situation is much improved on a year ago, and a gradual improvement in market conditions and the wider economy should support a modest increase in activity later in the year.”
Lenders are having to take action to entice customers back. Santander, which is now the second biggest lender in the UK, has increased the maximum amount it will lend.
First time buyers looking to buy a flat can now borrow up to 80 % of the value. The previous limit was 70%. Those first time buyers looking to buy a new build house can now borrow up to 90% of the property’s value, up from 80%. This is the first time that Santander has lent up to 90% of the value of a new build home since March 2008.
Phil Cliff, mortgage director at Santander, said: “We have seen confidence return to this segment of the property market and by increasing the maximum LTV (loan to value) on new build mortgages we are able to offer prudent first-time buyers more choice and flexibility.”
By Joe Lepper
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