News: Weekly News Round Up - Mortgage Brokers Join House Price Debate

Fri, 05 Feb 10

Mortgage brokers joined the debate about house prices this week. According to a survey by Platform, The Co-operative Bank’s intermediary lender, three quarters of mortgage brokers are predicting house price rises of up to 5% during 2010.

A similar proportion believe there will be an increase this year in interest rates, which the Bank of England this week decided to retain at 0.5%. Three quarters believe interest rates will rise to 1% by the end of the year.

Two thirds of those surveyed also believe business in the mortgage sector will be better in 2010 compared with last year - see Home News 4 Feb 2010.

David Tweedy, director of Platform, said: "Intermediaries are confident the next 12 months will be positive for the market and that the sector is ready to do business."

In contrast the Halifax is predicting that house prices will remain stable for much of the year.

House prices rose by 0.6% during January, according to latest figures from the Halifax - see Home News 4 Feb 2010.

While this is the seventh month in a row that the lender has recorded a rise in prices the Halifax’s housing economist Martin Ellis points out that the rise in January is below the monthly average rise of 1.1% for the previous six months.

He concludes that prices are set to remain flat for the rest of 2010, adding that there are signs that more people are putting their homes up for sale, which is likely to put the brakes on further price rises.

Latest asking price figures from Home.co.uk also point to a period of price stability in the coming months. According to Home.co.uk asking prices for homes on the market in England and Wales increased by 0.1% during the month leading up to its January Asking Price Index report.

The recent rises in prices of prime central London properties are also slowing down, according to latest figures from estate agency Knight Frank.

The estate agent’s Prime Central London Residential Index for January show that prices rose by 1.1%. This is the tenth monthly rise in a row but is the slowest monthly growth since August last year. It is also markedly down on December 2009’s price increase of 2.1%.

Despite this slowdown in price growth Liam Bailey, head of residential research at Knight Frank, remains optimistic that prices will continue to rise in 2010.

He said: "In the space of little more than 12 months we have seen a shift from a near market meltdown to boom rates of price growth.
"Since last April the combined impact of ultra-low interest rates, government stimulus, and rising confidence from buyers, about their own and the economy’s prospects, have served to push prices higher.
"As we stand, at the beginning of the 2010 spring market, there still seems to be considerable life left in the recovery in pricing. While buyers are back in force, vendors are few and far between, creating a significant imbalance between supply and demand. Slim pickings are the fuel that has been driving this market bounce.”
Lack of funding for the mortgage sector continues to be a concern for property market experts.

Around half of mortgage brokers who responded to the Platform survey said they were concerned about the availability of funds to the mortgage sector.

The Council of Mortgage Lenders (CML) is also fearful. It warned this week of a £300bn shortfall in the amount they will be able to lend which would normally be filled by savers' deposits.

This funding gap has been filled through government schemes during the current economic crisis, but these run out in four years time. The CML is warning that first time buyers could be affected in the coming years as lenders look to restrict loans to those with a large deposit.

The UK could be at risk “of a chronic under-supply of credit and the rationing of mortgages for customers for many years to come," says the CML.

Landlords are also concerned by the lack of mortgage finance. Half of landlords who want to expand their portfolios say they are being frustrated by the lack of mortgage finance, according to a survey conducted by LSL Property Services, which owns the Your Move and Reeds Rains lettings chains.  

David Brown, commercial director of LSL Property Services, said:  “Last year saw the buy-to-let market return as a viable investment.  Landlords recognise this, despite the rough ride they have had to endure over the last couple of years.  The average landlord made losses in 2007/8, but 2009 marked a return to form for property investment. 

But the lack of mortgage finance is holding the sector back.  Even experienced landlords who are keen to take advantage of lucrative returns and improving market conditions can’t get access to the cash they need.”

By Joe Lepper

See also: Mortgages, Life Insurance and Mortgage Protection Guide


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