No mortgages to meet increased buyer interest


On the back of falling house prices for the past 18 months, the number of people looking to buy property rose for the third month in a row in January, according to the Royal Institute for Chartered Surveyors. But whether this increased interest will translate into actual sales remains to be seen, given the ongoing difficulties in the mortgage market.


[UKPRwire, Tue Feb 17 2009] On the back of falling house prices for the past 18 months, the number of people looking to buy property rose for the third month in a row in January, according to the Royal Institute for Chartered Surveyors. But whether this increased interest will translate into actual sales remains to be seen, given the ongoing difficulties in the mortgage market.

Whereas some 18 months ago there were more than 15,500 mortgage deals on offer, currently there are only 1,542, which clearly reflects the continuing reluctance of banks and building societies to lend money in the wake of the credit crisis.

The great majority of property transactions are taking place when the buyer has a substantial deposit and presents less of a risk to lenders.

But for those wanting to borrow 95% of the property’s value, they will find only three deals available, compared to over 1,000 in July 2007. Most lenders now require people to have at least a 40% deposit, which works out to around £60,000 for an average priced house. As very few first-time buyers have that kind of deposit, this means that the vast majority of them are unable to get a mortgage and therefore are not in a position to take advantage of the falling house prices. And without first-time buyers the market will find recovery impossible.

According to Halifax, house prices rose in January for the first time in a year, though overall they are down 17% year on year, and a total drop of 40% is forecast by the Centre for Economics and Business Research (CEBR) unless more steps are taken by the government to boost lending. This scenario raises the spectre of more negative equity, as homeowners see the value of their home falling to lower than what they paid for it.

The number of agreed sales over the past three months represents a 30-year low, although this figure has stabilised at an average of less than three transactions per estate agent. Some 10% more surveyors are optimistic that the number of transactions will pick up rather than fall in the coming months.

Notwithstanding this optimism and the increased interest from buyers, most analysts believe that the only way to inject new life into the housing market, whose collapse is at the heart of the credit crunch, is for the government to intervene directly to boost the mortgage market. A recovering housing market would also increase consumer confidence and benefit the economy overall, and for this to happen it is essential that banks resume lending.




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