Mixed Messages From Mortgage Market

The latest Bank of England figures show that Banks and Building Societies cut lending by a net £2.425 billion between October and December, 2012.  This includes lenders who are taking part in the funding for lending scheme.  While I am noticing an increase in activity in mortgage lending, I know from speaking to a number of mortgage advisers that deals are taking longer to get through and that every box requires to be ticked before the lender will process the application – perhaps no bad thing!

Money Facts have recently called on lenders to re-open their books to first time buyers to get the property market moving.   Sylvia Waycot, editor at Money Facts, said “we have seen the first time buyer market stagnate as deposit demands become unrealistic.”  The latest significant changes the Government’s funding for lending scheme, which seems to put everything back on track – but only time will tell if this works out as planned.  We are already seeing the forward thinking lenders into the markets with innovative products to help first time buyers to get onto the housing ladder.  It looks as though we are about to enter yet another period of change within the mortgage market, and at last it might be for the better.

I hope the Government’s funding for lending scheme works as planned and the Chancellor takes the budget opportunity to do more to assist first time buyers.

Lindsay Darroch
Partner & Head of Property


House sales in January below December levels

The RICS have issued their January review indicating that a lack of buyer demand and low levels of supply got the housing market off to a poor start this year.  The RICS report indicates that agreed sales continue to drop while weakness in market activity was at its lowest point since June 2009.  A RICS spokesperson has indicated that “uncertainty over the prospects for employment, alongside the shortage of mortgage finance, particularly for first time buyers, continues to way heavily on transaction levels.”

Although the RICS survey is a small snapshot it is taken into account by the Bank of England’s Monetary Policy Committee at its monthly meetings to set interest rates.

This report certainly accords with my view and indicates the need for Government intervention and also shows the importance of an innovative and sales driven solicitor estate agent.  I will continue to keep you updated in respect of future figures and analysis.

Lindsay Darroch
Head of Property Services

Inflation soaring

The past few days have seen a plethora of new stories regarding the above expected rise in the rate of inflation.  There is now a feeling that the Bank of England may have to raise base rates sooner rather than later.  I would urge the Bank of England to hold their nerve in respect of interest rates as I think that the inflation pressures have been caused mainly by the rise in raw materials and also the recent rise in VAT.  I think it would be catastrophic for the fragile economy if the Bank of England started to raise interest rates now.

I note with interest that the swap rates have soared over the last few days on the growing possibility that the Bank of England will have to put up base rates.  The knock on effect is that lenders are withdrawing competitive fixed price deals and replacing them with higher rates as the rates on the money market increase.

This is having a very damaging effect on the economy as a whole and on the housing market in particular.

I personally felt that the Bank of England were slow in cutting rates when the economic crisis started and I hope they will not to make matters worse by raising interest rates too early.

Lindsay Darroch
Head of Property Services

UK house prices fell 1.3% in December

Although I am against the sensationalist aspects relating to house price surveys (the most recent conducted by the Halifax) I was interested to note that they expect limited movement in house prices during 2011 as interest rates are likely to remain low for some time.  They also pinpointed a reluctance to sell from some homeowners, this halting a decline in prices.

I do agree with this sentiment and am firmly of the view that house prices will remain stable during the course of 2011. However, I don’t think it will be any easier to sell your property and would therefore emphasize the importance of getting an experienced solicitor estate agency to sell your property.  On the other hand, I don’t think that there will be many bargains around and again when purchasing, speak to a property specialist to ensure that you are buying a property for the best possible price that you can.

2011 will be a very interesting year for the housing market!

Lindsay Darroch
Head of Property Services