Bank Mortgage Lending Falls 20%
24/06/2008
Mortgage lending for house purchase by the UK''s main banks has fallen to its lowest level on record. The British Bankers Association (BBA) said that in May, the number of new mortgage approvals to home buyers fell to just 28,000. That was a 20% fall in just one month and 56% down from May last year. The BBA said the number of new approvals was the lowest since its records started in 1997 and warned that the market would stay subdued. "Measures of mortgage activity were lower in May as a result of tighter lending criteria and economic pressures on households," said David Dooks of the BBA. "Only remortgaging business is holding up, where people need or want to take advantage of deals with other lenders," he added. BBA members account for about two-thirds of total UK mortgage lending. Contraction The UK property market is going through a rapid and unprecedented slump in activity and sales. The supply of mortgage funds, much of which comes from lenders in the international financial markets, has largely been turned off because of the continuing credit crunch which started nearly a year ago. Many participants in the property market, such as house builders, individual mortgage lenders, estate agents and surveyors, have been telling the same story, with widespread predictions that sales will fall by between 35% and 45% in the course of 2008. The knock-on effect has been that house prices have been falling for the past few months, with many experts now expecting a fall of more than 10% by the end of the year. Mortgage approvals are widely seen as a good indicator of sales in the next few months. The figures from the BBA suggest the most dramatic contraction in lending so far. However, its data does not include building societies. Figures from all lenders will be published by the Bank of England on 30 June. ''Deep correction'' Howard Archer, chief UK and European economist at Global Insight, said: "More housing market data, more very worrying news that heighten concern that we are in for an extended, deep correction in the housing market. "The BBA data graphically highlight that housing market activity is currently being throttled by stretched affordability and tight lending conditions. "Very low housing market activity seems certain to feed through to further depress already markedly weakening house prices."
Figures Show Plunge In Home Sales
23/06/2008
The number of UK property sales has fallen by 32% this year, according to HM Revenue and Customs (HMRC). There were 504,000 sales in the first five months of 2008 that were worth more than the new stamp duty notification limit of £40,000. That compares with 743,000 such sales in the same period last year. Meanwhile some big lenders have again put up the cost of their mortgages for new borrowers, with the Halifax and Lloyds TSB raising interest rates. House and flat sales have fallen sharply this year, mainly due to the shortage of mortgage funds available to borrowers in the wake of the credit crunch, and the increased cost of borrowing the money that is available. The HMRC''s figures show that in May alone sales were down by 37% on last year at just 98,000. Higher rates The cost of borrowing a home loan continues to rise day by day. The Halifax said it was putting up the interest rate on half of its fixed-rate deals by as much as 0.5%, and five of its tracker-rate loans have had their interest rates raised by another 0.3%. "Wholesale money is very expensive," said a bank spokeswoman. "Unfortunately, these increased costs have to be passed on to new customers by banks and building societies," she added. Lloyds TSB, which sells mortgages through its Cheltenham & Gloucester subsidiary, has also made its fixed-rate deals more expensive, putting them up by 0.3%. Someone taking out a 90% mortgage for two years with the Halifax will now be charged interest at 7.29%. The effect of all this has been a glut of homes for sale on estate agents'' books, according to the property website Rightmove. It says that sellers now outweigh buyers by a ratio of 15 to 1. "It''s a sign that properties are taking longer to sell so there are more on the market," said Miles Shipside of Rightmove. "There are approximately half the mortgages available there were a year ago, so there''s only about half the transactions," he added.
Housing gloom 'worst in 30 years'
29/04/2008
"Confidence in the UK housing market fell in March to its lowest point in 30 years, according to a closely watched survey of property surveyors. The Royal Institution of Chartered Surveyors' (Rics) said that 78.5% more surveyors reported a fall than a rise in house prices in March. This was the gloomiest reading since Rics began the survey in 1978. The government's own house price figures confirmed a fall in prices in February by 1.6%. The results come after leading mortgage lenders have offered similarly downbeat views on property prices. Rics said the next six months would be crucial for homeowners and would-be buyers in the UK. Historical low The Rics house price balance dropped for the eighth consecutive month. It exceeded the previously lowest reading in June 1990. Jeremy Leaf, Rics spokesman, said the gloom was the result of the credit crunch and its effect in stopping mortgage providers lending to each other. Sentiment is at a very low ebb and will continue to remain depressed while the economy suffers from this unique liquidity blight," he said. But he added that a significant crash in prices remained unlikely and buyers with access to large deposits had the chance to get their hands on property they could not previously aspire to. Following the trend The survey follows March reports from the UK's two biggest mortgage lenders which reported month-on-month falls in house prices and predictions of a fall throughout 2008. Last week, the Halifax reported a 2.5% fall in prices in March, the biggest monthly decline since September 1992 and the slowest annual growth for 12 years. Prime Minister Gordon Brown and Chancellor Alistair Darling are meeting banks and mortgage lenders to discuss liquidity - widely regarded as the key factor affecting mortgage availability. The problems in the financial markets has meant lenders are keen only to attract low-risk customers who can offer a significant deposit. Some 49% more surveyors reported a fall than a rise in new buyer enquiries, against 39% in January. "Many would-be buyers are either struggling to raise the necessary finance to precipitate a move or are exercising caution in the light of current economic uncertainty," Rics said. Falls in price The falls in prices are particularly marked for flats and maisonettes and in certain parts of the country. The sharpest falls were in the East Midlands and East Anglia, while slower falls were recorded in north-west England, Wales and London. Scotland continued to buck the trend, with house prices reported to be rising slightly. The stock of unsold property on surveyors' books declined by 1.3% compared with February, but up 50% over the year. Peter Bolton King, chief executive of the National Association of Estate Agents (NAEA) warned against doom-mongering, saying the housing market was still underpinned by strong economic factors. "The market is battling with the credit crunch, which has undoubtedly had an effect on confidence," he said. "However, the key factors that underpin the housing market still exist - low unemployment, historically low interest rates and a pent-up demand for houses. "We can see from the figures that it is not all doom and gloom out there and we need to tread very, very carefully before making long-term judgements on the market at this current, unsettled, time." Government figures Meanwhile, the government's own house price survey, also published on Tuesday, confirmed a fall in house prices in February, down 1.6% on the previous month. The Department for Communities and Local Government (DCLG) survey runs a month behind other house price indexes as it is based on sale completions, rather than mortgage approvals. It put the average house price in the UK in February at £217,737. In the three months to the end of February, property prices fell by 0.5%, against a fall of 0.2% in the previous quarter. Annual house price inflation in the UK was down from 8% in January to 6.7% in February, with the slowdown particularly marked in London (down from 13.8% to 9.5%). Again, Scotland showed the highest year-on-year rise in prices, at 9.7%.
House Auctions at 3 Year Low
19/03/2008
The number of properties sold at auction hit a three-year low amid a credit squeeze, the Royal Institution of Chartered Surveyors (Rics) says. In the final three months of 2007, some 57% of properties were sold after being put up for auction, compared with 69% in the same period of 2006, Rics said. Total sales were also down, although it remained a popular way to sell homes, according to Rics. House price rises have stalled in subsequent months, other surveys show. The Rics figures show 4,539 properties were sold in the final quarter of 2007 at auction, a fall of 9% compared with the same period the previous year and also down 9% on the previous three months. That left 3,310 properties unsold, a 50% rise more than in there months running from October to the end of December in 2006. Tough year The slowdown was particularly marked in London and the North East, the survey said. "Fears over further house price falls have taken some stimulus out of achieved sales at the auction house as specialist lending has all but evaporated," said Rics economist Oliver Gilmartin. "While lots offered at auction have stabilised, we expect a tougher year for many at the margins in 2008 as mortgage providers become more selective." He added that the mid-tier of the market would be affected, as well as people with poor credit histories feeling the pinch. But Rics said that going to auction was still a popular method of sale, with 15% more residential properties being offered for auction in 2007 than the previous year.
Surveyor Gloom Close To A Record
11/03/2008
The number of UK surveyors reporting house price falls in February was close to the historic level of June 1990. Cautious homeowners have caused housing stockpiles to rise to levels not seen for a decade, the Royal Institution of Chartered Surveyors (Rics) said. Some 64.1% more surveyors reported a fall than a rise in house prices in February - up from 54.7% in January. But the survey said Scotland was bucking the trend, with 25% more reporting price rises - up 18%. Highs and lows The survey showed the UK trend had continued for the seventh consecutive month and was close to the June 1990 low, when 64.5% more surveyors reported house price falls than increases. But the picture in Scotland mirrored economic data coming out of the country, showing a rise in the balance of surveyors reporting price rises from 7% to 25%. Across England and Wales, enquiries from would-be new buyers are still dropping fast and fell for the 15th month in a row, suggesting a continued slowdown in the market is likely in the coming months. "Many would-be-buyers are either struggling to raise the necessary finance to precipitate a move or are exercising caution in light of current economic uncertainty," said Rics. Common theme House price surveys have all suggested a slowing market, but differ in their interpretation of the pace of decline. According to a monthly survey from the Halifax, prices across the UK fell by 0.3% in February, taking the annual rate of inflation down from 4.5% to 4.2%. But it did not report such a speedy decline as its rival, the Nationwide, which registered its fourth monthly price fall in a row and said prices in the three months to February had been 1% lower than in the previous three. Rics said that would-be buyers were struggling to raise the necessary finance or sitting tight during the current economic uncertainty. Some 37% more surveyors said new buyers' enquiries were down than those reporting increases. Effect on stock Employment levels remain strong in the UK, which means homeowners are under little pressure to sell. Yet a lack of demand meant the stock of unsold property on surveyors' books was up 8.5% in February, the fifth monthly rise in excess of 8%. "Confidence in the market is clearly having an effect on prices," said Rics spokesman Ian Perry. "While there is very little new supply coming onto the market, it is unlikely that there will be significant price drops in the short term but the build up of unsold stocks will encourage buyers to negotiate lower asking prices."
Surveyors' gloom at house prices
14/02/2008
The number of UK surveyors reporting house price falls grew for the sixth consecutive month in January. The Royal Institution of Chartered Surveyors (Rics) says such a trend has not been seen since the housing recession of the early 1990s. Some 54.7% more surveyors reported a fall than a rise in house prices in January - up from 49.1% in December. The picture mirrors other surveys in recent weeks which suggested that the property market is stalling. The Rics survey said that the only part of the UK where prices continued to rise was Scotland. 'Lack of demand' Surveyors say the credit crunch is continuing to have an effect on the housing market. "A lack of demand and confidence in the housing market is clearly behind the recent price slowdown," said Rics spokesman Jeremy Leaf. "Tightening mortgage lending criteria is a block to many who are keen to take the housing market plunge. "Agents are finding it difficult to market properties to an audience which has decided to watch the current economic theatre from the wings." The Bank of England cut interest rates at its December meeting from 5.75% to 5.5%, and then again by a further 0.25% last week. "If mortgage lenders filter the recent interest rate cuts into the market, demand should begin to increase," said Mr Leaf. He added that strong employment conditions were shielding the housing market from significant price falls. Housing stock The stock of unsold property on surveyors' books increased by more than 10% in January and by in excess of 40% since September, the Rics figures showed. The average level of unsold property per surveyor was 85 - the highest figure since February 1999. January figures from the Halifax bank and the Nationwide Building Society signalled falls in annual house price inflation. The Halifax, the UK's biggest mortgage lender, said annual house price inflation was 4.5% in January, down from the previous month's figure of 5.2%. Nationwide said the annual rate of price growth dropped to 4.2% in January, which was the lowest rate since December 2005.
House repossessions at eight-year high.
09/02/2008
House repossessions are at an eight-year high, having risen over 20 per cent in 2007, figures have shown. A total of 27,100 homes were taken back by lenders after their owners failed to keep up with mortgage repayments. The figure is the equivalent of 0.23 per cent of all mortgages, the Council of Mortgage Lenders said. But, the CML said the figure is 10 per cent lower than previously estimated and well down on the high of 75,540 repossessions reached during the 1991 housing crash. Overall, fewer than one in 400 mortgages led to a home being repossessed during the year, less than half the level seen during the first half of the 1990s. At the same time, the predicted increase in repossessions during the course of 2007 failed to materialise, with just 13,500 homes taken over by lenders during the final six months of the year, compared with 13,600 during the first half. The CML said that although repossessions had risen from their recent low of fewer than 10,000 a year in 2003 and 2004, they continued to represent a tiny fraction of all home loans. The number of mortgages that were in arrears of more than three months rose by nearly 9 per cent during the year to 129,800, the equivalent of just over 1 per cent of loans. But less than 0.5 per cent of mortgages were in arrears of more than six months - around a seventh of the level seen during the early 1990s. The CML said it is difficult to forecast what the likely level of arrears and repossessions would be in 2008. Michael Coogan, director general of the CML, said: "Lenders take their responsibilities to borrowers facing repayment difficulties very seriously, and many go to exceptional lengths to provide debt counselling, reschedule payments, extend loan terms, or in some circumstances even allow payment breaks. "Despite this, the number of repossessions is likely to be higher in 2008 as a result of wider issues in the economy and the mortgage funding markets."
Home Repossessions rise to 27,000
08/02/2008
The number of people whose homes were repossessed last year has risen by 21%. The Council of Mortgage Lenders said 27,100 homes, the highest figure since 1999, were taken over by lenders after people fell behind with repayments. The figure for the UK is more than the 22,400 in 2006, but not as extreme as the CML had forecast. It is still a sharp rise on the 8,500 of 2003. And the CML warned that the number of repossessions was likely to rise again in 2008 as the credit crunch tightened. Meanwhile, the numbers of mortgages behind on payments rose by 8.6% compared to 2006, the organisation, which represents mortgage lenders, said. 'Wider issues' Added cost pressures on homeowners are expected this year, owing to higher energy and food bills, while more than a million people are coming off fixed-rate mortgages. Michael Coogan, CML director general, said: "The number of repossessions is likely to be higher in 2008 as a result of wider issues in the economy and the mortgage funding markets." He said that "no one is necessarily to blame for this" but called for "a fair and reasonable balance of responsibility". Mr Coogan said consumers, their advisers and lenders, and the system of state support, all had a role to play to ensure "repossessions are minimised". Tighter credit market The rise in repossessions was likely to be down primarily to the credit crunch, with lenders taking fewer risks with borrowers who were already over-extended. Charities have previously warned about some homeowners using credit cards to pay their mortgages, but with credit increasingly difficult to come by, many have been struggling to meet repayments. Most mortgage possession claims do not end with the owner losing their home, because the lender often comes to an arrangement with the borrower to pay off the arrears. But Sue Edwards, head of consumer policy at Citizens Advice, said: "Our evidence shows that lenders are not always doing everything they can to help borrowers in trouble, all too often piling on extra charges and being too quick to take court action rather than being prepared to negotiate affordable repayment arrangements. "We want to see all lenders being reasonable when dealing with customers who do get into trouble, and taking court action for possession only as a last resort." And Shadow Housing Minister Grant Shapps said: "These figures sadly make a mockery of Labour's hollow claims to have helped more people onto the property ladder." Interest rates Despite the latest rise in repossessions, figures are still much lower than the numbers in the early 1990s. when they reached 75,500 repossessions a year. The CML figures have been released the day after many of the largest - but not all - mortgage lenders announced they would pass on the 0.25% cut in interest rates in full to customers. These lenders said the cut on the standard variable rate would come in early March. Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors, predicted further interest rates in the coming months, offering more relief to homeowners. Godfrey Blight, chairman of the Intermediary Mortgages Lenders Association, said arrears and repossessions would rise in 2008, but not "catastrophically so". Political row The figures have prompted political debate. Liberal Democrat leader Nick Clegg said: "We must take steps to ensure that repossession is only ever a last resort - by making financial advice compulsory at the point repossession claims are issued." For the Conservatives, shadow housing minister Grant Shapps said: "These figures sadly make a mockery of Labour's hollow claims to have helped more people on to the property ladder. "The Government needs to urgently address the issue of affordable housing." A Treasury spokesman said: "The Government's Housing Finance Review, to be published in the Budget, will explore options to increase the uptake of affordable long-term fixed-rate mortgages." On Monday, the Insolvency Service said the number of people declared insolvent in 2007 was 106,645, just slightly below the record high in 2006, while bankruptcies were up 2.4%. Experts said it would be increasingly difficult for people to borrow their way out of trouble. Those who fear getting into trouble with mortgage repayments have been urged to speak to their lender.
The house price boom of recent years...
12/10/2007
The house price boom of recent years has brought "misery" to thousands of people and represents a "failure" of policy, a leading economist has argued. Roger Bootle, managing director of Capital Economics, told a property conference that the lack of new housing being built was the critical problem. Ministers had failed to secure more land for housing development, he said. But a leading civil servant said the government was "taking action" to provide more land for building. 'Gimmicks' Annual house price inflation in England and Wales has slowed in recent months, the Land Registry confirmed earlier this month, following a series of interest rate rises in 2007. But house prices in London are still rising 15% year on year. Mr Bootle said the "extraordinary" rate of house price growth seen in recent years had had damaging effects for the economy and household finances. "Most people see the UK housing market as a story of great success," he told an industry event in Wales. "I don't. On the contrary, I see it as one of the UK's most unbridled failures." The root of the problem was the lack of land being made available for new building, he said. "I wish the government would forget all the gimmicks - affordable housing, key workers and the like," he added. "The central issue is quite clear - it is getting to grips with the availability of land for building and ensuring that the rate of building moves up quite sharply after that." Policy priority Prime Minister Gordon Brown has made closing the affordability gap for many aspiring homebuyers a key policy priority. He has increased the target for new housebuilding to three million homes by 2020. Responding to Mr Bootle's comments, a senior official from the Department of Communities and Local Government (DCLG), acknowledged housebuilding had to keep pace with the rising number of households being created. "We will, and are, taking action to deliver more land through the planning system and recognise just how important that is," said Richard McCarthy, the DCLG's director general of programmes, policy and innovation.
The UK housing market is continuing to slow down under the effect of higher interest rates...
12/09/2007
The UK housing market is continuing to slow down under the effect of higher interest rates, the Royal Institution of Chartered Surveyors says. Its latest survey reveals that in August slightly more surveyors saw prices fall locally than saw them rise. Rics says this was the first time this had happened since October 2005. This contradicts the evidence of all other house price surveys, but Rics said enquiries from new buyers had also fallen for the ninth month in a row. "Affordability is at its most stretched in over a decade and many will worry that rising mortgage repayments will prove a step too far," said Ian Perry of Rics. "The market will soften further, going into the autumn, reducing some impetus from those that have been chasing a rapidly-moving target," he added. Divergence Surveys from organisations such as the big mortgage lenders, the Department of Communities and Local Government, and the English and Welsh Land Registry, have all reported house prices continuing to go up at a brisk rate. The persistence of double-digit house price inflation this year, despite the five increases in interest rates imposed by the Bank of England since the summer of 2006, has surprised most market observers. For instance, earlier this week, the DCLG reported that average house prices in July were rising faster than before at 12.4% a year - the fastest rate since March 2005. Two of the UK's largest mortgage lenders the Halifax and Nationwide both reported a small rise in house prices in August. One explanation for what is going on is that there is a divergence between London and the South East - where prices have been stoked up by huge City bonuses and a shortage of new houses - and the rest of the country, where prices are rising more slowly. That is why the Rics survey may be a good indicator of an impending downturn. Survey methods The Rics survey does not measure actual house prices. It simply asks a sample of its members around the country if prices locally are higher or lower than in the previous month. The balance between the two is what gets reported. Thus surveyors in some parts of the country are detecting a slowdown, even if average prices across the UK have yet to fall. The methodology may seem crude and subjective. However, Rics has traditionally had its finger on the pulse of the market when it has changed direction - as during the property slump of the early 1990s, when many other commentators refused to acknowledge that prices were falling. Rics also says that the market was affected in August by the advent of compulsory Home Information Packs for the sale of houses with four bedrooms or more. It says 51% fewer of these were sold during August than in the same month a year ago.
The buy-to-let property market is still booming
07/09/2007
The buy-to-let property market is still booming, despite higher interest rates, according to the Royal Institution of Chartered Surveyors (RICS). Demand for rented property is rising as high property prices are forcing potential home buyers to remain in rented accommodation, the group said. The result is that rents are rising at their fastest rate on record. Meanwhile, buy-to-let mortgages have surged over the past three years as investors make the most of rent rises. "Current economic uncertainty has created an ideal platform for buy-to-let investors to cash in on rising rental levels," said RICS spokesperson Jeremy Leaf. "Many would-be buyers have decided to wait and see how the interest rate cycle will affect the market," he added. Rising rents In the past three years the number of buy-to-let mortgages in existence has nearly doubled to 939,000 - and they now comprise nearly 10% of all outstanding mortgages. Experts have blamed rising house prices and rising rents on the continuing shortfall in new homes being built and the rapid increase in the UK's population - largely due to immigration. The Association of Rental Letting Agents (ARLA) reported that rents have now risen to an all-time high as demand outstrips supply in all parts of the market. The average weekly rent for a flat in prime central London is now £525 a week, with £215 a week being charged in the South East and £150 in the rest of the UK. The growing influence of buy-to-let investors, with more financial muscle than the typical first-time buyer, helps explain why house prices in the UK are still rising briskly, despite the Bank of England having imposed five rises in interest rates since the summer of 2006. On Monday, the Department for Communities and Local Government said UK house prices were still accelerating, rising 12.4% in the year to July - driven largely by increases in London and the South East.
First-time buyers are suffering an increasing squeeze on their incomes as they get on the property...
02/02/2007
First-time buyers are suffering an increasing squeeze on their incomes as they get on the property ladder, says the Council of Mortgage Lenders (CML). Its latest figures show that average first-timers are now borrowing 3.39 times their incomes, a new record. They are also using up 19.7% of their incomes to repay just the interest on their loans, the biggest proportion since 1991. Overall, the CML says the property market is starting to slow down. "Both market conditions and sentiment are coming off the boil and affordability is ever more stretched, but consumers should not expect any immediate easing in the financial pressures they face," said the CML's director general, Michael Coogan. As evidence, the CML pointed to the fact that in July, all loans for house purchase, or by people remortgaging, fell back from their level in June. Although these figures are erratic from month to month, in both cases they were lower than in July last year. "The long-anticipated slowdown in the housing and mortgage markets may now be beginning to materialise," said Mr Coogan. Squeeze The number of new loans to first-time buyers - and their total value - dropped in July too, as rising interest rates and ever-increasing house prices took their toll. At 32,400, these were down on both June this year and July last year. And with annual house price inflation still in double digits, the average first-time mortgage has now reached £119,000. The number of people taking out mortgages to move house also dropped back, with these borrowers facing a financial squeeze too. They are now, on average, using up 16.9% of their incomes to meet their interest payments while borrowing on average £137,350. That interest repayment burden is the highest experienced by this category of borrower since 1992. At the same time, fixed-rate loans are at a new peak of popularity, with 79% of all new mortgages being lent at fixed rates, as borrowers have sought to protect themselves against any further increases in interest rates.
Property prices are falling for the first time in two years
08/01/2007
Property prices are falling for the first time in two years due to a drop in demand, a leading housing market survey revealed today. The latest Royal Institution of Chartered Surveyors study, released today, said that inquiries from potential buyers suffered their biggest fall for three years in August and prospects looked dim for the market picking up in the near future. The influential report, based on a poll of estate agents and surveyors, showed property values falling in the Midlands, the North West, East Anglia, Wales, and Yorkshire and Humberside. London and the South East, the South West and Scotland are still seeing an increase but on average prices are down. It said that 1.8% more chartered surveyors reported a fall than a rise in house prices in August, down from 10.8% more reporting a rise in July. New instructions to sell property fell for the third month in succession and Rics said the stock of unsold property on surveyor's books declined with levels down 10% on year-ago levels. The number of four bedroom houses on the market has declined by 51% compared to a year ago, potentially pushed down by the August home information packs deadline for four-bedroom, or larger, homes and the high cost of moving, especially at the top of the market. Rics said that weakening demand, driven by rising interest rates, had severely dented surveyor confidence in the outlook for house prices. Ian Perry, Rics spokesman, said: 'Potential house buyers have become far more cautious as they wait and see what affect interest rate rises will have on household finances.
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