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News: Weekly News Round Up - Increase in Home Sales But Fears Over Mortgage Availability Remain

Fri, 23 Jul 10

The number of homes being sold in the UK has increased, according to latest HM Revenue and Customs (HMRC) figures, but further rises are unlikely with restrictions on mortgage lending expected later this year.

HMRC says that between May and June the number of homes sold rose by 21%.

During June 86,000 homes were sold, which is the highest monthly sales figure so far this year and up 15% on the same month last year.

Sales for the first six months of this year are also 21% up on the same period in 2009.

But the figures are sill historically low and are unlikely to pick up to levels seen during the peak of the property market in 2007.

A Royal Institution of Chartered Surveyors (RICS) spokesman said: “Sales are still running well below the levels preceding the onset of the credit crunch, partly because of a shortage of mortgage finance as well as, until recently, the lack of stock on the market.”

Last week the Council of Mortgage Lenders (CML) warned that if proposals outlined by the Financial Services Authority to tighten lending criteria are introduced the housing market could suffer – see Home News 16 July 2010. The FSA wants to bolster checks on customers’ income and restrict interest only deals.

Latest mortgage lending figures are showing a mixed picture.

Gross mortgage rose by 15% between May and June, according to latest CML figures – see Home News 22 July 2010.

The CML says that gross mortgage lending totalled £13.1bn in June, compared to £11.4bn in May. The figures are also up on figures released in June the previous year, by 7%.

Gross mortgage lending during the second quarter of 2010 was worth an estimated £35bn, up 17% on £30bn during the first quarter of the year and up 7% on the second quarter of 2009.

But CML economist Paul Samter said that gross mortgage lending is still at a historically low level.

He added: “Transaction levels are subdued and likely to remain so while access to credit remains constrained.”

In contrast to the CML gross mortgage lending figures, mortgage lending by high street banks is down.

The number of mortgages approved for house purchases in the month fell from 36, 418 in May to 34,813 in June, says the British Bankers' Association (BBA).

Gross mortgage lending was also down from £8.9bn in May to £8.6bn in June.

BBA statistics director David Dooks said: “The banks’ mortgage lending position saw little changed in June. The abolition of HIPs and a reported increase in the number of house sellers is expected to encourage activity in the market, though this may be tempered by households’ uncertainty over job prospects and the impacts of fiscal tightening.

“Overall lending to business continued to reflect subdued demand, and contraction in lending to most non-financial sectors slowed.”

This subdued demand is already being reflected in Home.co.uk’s latest Asking Price Index. This found that around 74, 000 homes for sale had their asking price cut in the month of June by an average of £15,000 per property.  This is the largest number of asking price reductions in a single month since January 2009.

David Brown, commercial director of LSL Property Services, says that the future is looking bleak for the buy-to-let mortgage sector as well.

He said: “The lending market hasn’t loosened up for landlords. In the first quarter of the year, buy-to-let mortgage lending was less than a third of its level in 2008.  And despite glimmers of hope that more products are entering the market in the last few months we will not see a return to the level of lending of two years ago in the foreseeable future.

“Mortgage finance is still the main obstacle for future property investment. And this is restricting the supply of rental accommodation, pushing up rents. A thriving private rental sector is crucial to catering for the country’s need for affordable housing.  Until lenders offer cheaper, high value buy-to-let mortgages to investors, Britain will continue to experience a housing shortage.”

There was unwelcome news this week for homeowners facing repossession.

Housing minister Grant Shapps says that money available for each home through the Mortgage Rescue Scheme would be reduced.

The scheme was set up to allow struggling borrowers to sell their home to a council or housing association and continue living there as a tenant.

Shapps said that the proportion of government funding for each home bought through the scheme would fall from 65% to 55%.

 

By Joe Lepper 

See also: Asking Price Index, House Prices and Trends by Town and Postcode, Mortgages, Life Insurance and Mortgage Protection Guide

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