Fri, 18 Sep 09
Latest figures from mortgage lenders and estate agents indicate that the worst of the housing market recession could be over.
According to figures released by the Council of Mortgage Lenders there were 56,000 mortgages approved in July this year, an increase of 19% over the last 12 months and up 24% on figures released in June 2009 – see Home News 15 Sept 2009.
This is the first annual growth in the number of mortgage approvals recorded by the CML for more than two years.
CML economist Paul Samter says these figures could point to an end of the housing market blues, saying: "It's tempting to call the turn in the mortgage market at this point, and there is certainly concrete evidence that lending for house purchase is increasing.”
Estate agents are also in good spirits. According to the latest survey by the Royal Institution of Chartered Surveyors (RICS) more surveyors reported that UK house prices were rising in the three months to August than reported a fall – see Home News 15 Sept 2009.
This is the first time in two years that the three-monthly figures have shown a positive attitude among surveyors regarding house prices.
Surveyors in the South East of England were among the most positive about house prices especially as prices rose at the fastest rate in their area. Significant price rises were also recorded by surveyors in London and the South West.
In terms of sales surveyors in the Midlands are the most upbeat. They saw the highest level of sales in the three months to August. In the East Midlands the sales per surveyor rate was 22 and the figure was 19 in the West Midlands.
Despite the positive figures from the CML and RICS there are still fears that price rises and increases in lending may falter in the coming months.
According to Home.co.uk’s latest Asking Price Index asking prices are already sliding, albeit by a small amount. The figures show that the mix-adjusted average asking price for homes on the market in England and Wales fell by a 0.6% in September.
While CML’s Samter is broadly upbeat, he says that remortgaging activity is still extremely low compared to last year. The number of remortgage loans approved in July this year was 41,000, up 21% on figures released in June 2009 but down 53% on figures released in July 2008.
He added: "But there are still constraints affecting the lending industry's capacity to fund increased lending, as well as less consumer motivation to remortgage for the time being. The overall lending picture is likely to stay relatively subdued for some time, especially as the wider economy is far from robust as yet.”
The value of the loans being handed out by lenders is also decreasing, according to further figures released by the CML this week. These figures revealed a 13% drop between July and August in gross mortgage lending.
Gross mortgage lending fell from £14.5bn in July to £12.6bn in August, and is a third down on the August 2008 figure of £19.9bn. The CML says that the seasonal fall in activity in August “is to be expected”.
The latest report by economic forecasting group Ernst & Young Item Club takes note of the increase in the number of mortgages being approved and recent rises in house prices, but warns this may be temporary.
It says that the rises are largely due to a “small number of cash-rich buyers.”
Hetal Mehta, an economist with the group, said: “The supply of these funds is limited, which means prices are likely to dip again in the first half of next year.”
The Ernst & Young Item Club report says that house prices are unlikely to return to their 2007 peak until 2014 at the earliest.
It points out that an increasing number of homeowners are now reluctant to sell because they are either in negative equity or have seen too much money shaved off the value of their home over the last two years.
The Ernst & Young Item Club is also calling for a relaxation in mortgage lending criteria, particularly to first-time buyers. Most first-time buyers are still having to put down an average deposit of 25%.
Its report says: “The scarcity of mortgage supply and tough lending criteria is making it particularly difficult for first-time buyers to enter the market.
"Given that they typically purchase cheaper properties, this will have significant implications for those looking to trade up, clogging up the market and limiting the number of transactions taking place.”
By Joe Lepper
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