News: Weekly News Round Up: Mortgage Market Set To Slow As Prices Flatline

Fri, 20 Aug 10

A slowdown in the mortgage market is predicted for the rest of the year as house prices flatline.

According to latest figures released by the Council of Mortgage Lenders (CML) gross mortgage lending rose by an impressive 5% in July - see Home News 19 Aug 2010.

The figures reveal that gross mortgage lending totaled an estimated £13.6 billion in July, compared  to June’s figure of £12.9bn.

But CML economist Paul Samter warns that this rise is unlikely to be replicated over the year. He points out that gross mortgage lending is still down 3% on figures released in July last year.

Gross mortgage lending is set to reach £140bn by the end of the year, the CML is predicting.

Samter said: “The rest of 2010 is likely to see rather lower lending and transaction numbers compared to the same period last year. Late 2009 saw a pick up as some homebuyers looked to move before the end of the first stamp duty holiday. 

“But for most home owners, the situation is not that bleak. The vast majority of households continue to pay their mortgages in full every month, and many have benefited from the record low interest rates. This looks set to continue for some time yet. While there are a range of risks to the outlook, low rates will further help most stay on top of their finances.”

Further evidence that house prices are leveling out emerged this month, with latest figures from Home.co.uk’s Asking Price Index  showing an increase in the number of house sellers prepared to drop their asking price. The figures show that the number of properties that were reduced in price increased from 74,000 in June to 92,000 in July. The mix-adjusted average asking price for homes on the market in England and Wales edged down 0.1% for a second consecutive month.

The exception is university towns where house prices continue to rise. According to Lloyds TSB 60% of university towns have seen house price growth outperform their region in the past five years.

In Aberdeen for example, which is home to 29,300 students, house prices have risen by 40% over the last five years, compared to a Scotland wide growth of 14%.  

Nitesh Patel, housing economist at Lloyds TSB, said:  “Growing student numbers have had a big impact in boosting house prices in some university towns, where the increase in demand has led to the local market outperforming the rest of the region.”

With sellers in most areas still struggling to find buyers those in the buy to let market are increasingly looking to increase profits through rent rises rather than selling stock.

According to LSL Property Services rents rose for the sixth month in a row in July - see Home News 19 Aug 2010.

The figures from show that rents rose by 0.5% on average during July and the average UK monthly rent is now £676, which is 2.3% higher than a year ago and £12 per month lower than the market peak of two years ago. This latest increase in rents puts the average yield in July at 4.9%.

The proportion of rent in arrears has fallen, but remains high at 9.2% in July. The proportion was 11.2% at the start of the year.

David Newnes, estate agency managing director at LSL Property Services, said: “Rents are still playing catch-up with the gains house prices made in the last year. The recovery in prices 12 months ago caused an exodus of accidental landlords from the market, ending the glut of supply of rental accommodation.

“Although house price rises have leveled off, landlords are still reaping the benefits of the constrained supply, and the improving yields have restored a healthier balance to the dynamics of property investment.    

“We don’t expect rents to fall away any time soon. With inflation well above the Bank of England’s target, interest rates can only go one way – north. When they rise, many landlords will face increased monthly mortgage repayments – and many will try to raise their rents to cover the difference.” 

For those that have managed to sell their home, even with a reduced asking price, the most popular day of the year to move is almost here.

According to latest data from the Post Office 1 September is the most popular day to move, just before the start of the school year - see Home News 18 Aug 2010.

But the stress of moving can make people forgetful, the Post Office is warning.

It recommends that those moving home let utility companies know at least a fortnight in advance, however the Post Office’s latest research found that four out of ten home movers put this off until less than a week before moving. A quarter leave a similarly short time to tell their bank of a change of address.

Hugh Stacey, head of the Post Office’s telecoms service HomePhone, said: "Our findings show a surprisingly large number of people make little or no effort to plan their move in advance, despite it being a huge life event.”


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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