News: Weekly News Round Up - Reality Check For The Property Optimists

Fri, 10 Jul 09

Just as optimism was beginning to return to the property market a number of negative news stories this week have brought homebuyers and sellers down to earth with a jolt.

Among the reality checks this week was the Government’s banking white paper. Under consideration are plans to tighten lending criteria further to ensure it is better linked to affordability and income.

While curbing reckless lending is admirable the mortgage sector will be keeping a close eye on developments to ensure that the changes are not punitive for responsible borrowers.

Another blow is that the cost of conveyancing for home-buyers and sellers is set to increase after the Land Registry announced it was putting up its fees for the first time in 16 years – see Home News 6 Jul 2009.

All 90 fees charged by the Land Registry, including recording the sale of a property and supplying copies of an entry, will increase.

The fee for registering the sale of a home costing the current average of around £153,000 will increase by £50 to £200 and registering the sale of a property that costs more than £1m will increase from £700 to £920.

A statement from the Land Registry said: “Due to the downturn in the property market and the deterioration in the economy generally, our intakes of work fell heavily in 2008 and 2009 leading to an unsustainable reduction in our fee income.”

House prices have also slipped back, after a spate of positive figures in recent weeks from building societies and Home.co.uk’s asking price index.

According to latest figures from the Halifax, house prices decreased in June by 0.5% - see Home News 8 Jul 2009.

This is a significant change from Halifax’s May figures that revealed a 2.6% rise and just last week the Nationwide building society announced a 0.9% rise in June.

Despite this turnaround in house prices the Halifax’s chief economist Martin Ellis believes that this latest fall indicates a stabilisation of the market, rather than further falls.

He says that the annual rate of decline has still eased slightly, from 16.3% to 15% and that on a quarterly basis the 1.9% fall in house prices in the second quarter was the smallest since the first quarter of 2008.

Ellis added: “ These figures provide evidence that the underlying pace of house price decline is easing. Improvements in affordability and low interest rates have stimulated housing demand. This, together with a low level of properties available for sale, has helped to stabilise activity and reduce the underlying rate of house price decline in recent months.”

Commenting on these latest Halifax figures, Peter Rollings, managing director of estate agent Marsh & Parsons, says he expects to see fluctuating prices until next spring.

He said: “This is a slightly bigger drop than we were expecting. The thing to remember is that this is a bathtub-shaped slump and at the moment we are still bumping along the bottom. 

“We aren’t going to see any big improvements this year and these small changes, both up or down, will continue for at least another six months.  I am expecting a recovery in prices around next spring.  That’s when we’ll finally start climbing up the sides of the tub.  Until then, we’ll continue to see small movements in average prices.”


Despite this run of grim latest statistics the Nationwide building Society clearly feels optimistic enough to bring in a 125% mortgage deal, the first the market has seen for some time.

But a closer look at the details shows that this new product is less about optimism and more about retaining customers.

The 125% mortgage, which the Nationwide has described as a “niche offer,” will only be open to existing customers in negative equity that want to move house.

John Charcol, from mortgage broker Ray Boulger, told the BBC this week that he knows of at least two other major lenders that are looking to introduce similar 100% plus mortgage deals to retain customers facing negative equity.

While such deals will not help first time buyers, a latest Council of Mortgage Lenders report says that the “bank of mum and dad” is increasingly being used to help young people enter the market.

Latest CML estimates show that the proportion of young first-time buyers getting help from parents to enter the market is at its highest ever level.

With an average deposit of 25% of the value of the property needed by first time buyers it is no wonder that parents are being relied on more heavily.

CML economist Paul Samter said: “The bank of mum remains an apparently important source of help for young first-time buyers. Some mortgage products specifically reflect this fact, and again we may begin to see more products that echo this phenomenon."

At the tail end of the week the Bank of England (BoE) announced interest rates were to be kept on hold at 0.5% for the fourth month in a row – see Home News 9 Jul 2009.

Rollings described the decision as unsurprising. He said: “Lowering interest rates any further wouldn’t work and it’s not as if the BoE could drop them much further anyway.”


See also: Nationwide House Price Index, Home Asking Price Index, House Prices and Trends by Town and Postcode, Mortgages

Back to: News Index