Mixed signals from the housing market this week with figures from the Council of Mortgage Lenders (CML) showing a jump in the number of mortgages approved for first time buyers, whilst surveyors report that the housing market is still in the doldrums.
Meanwhile Savills predict house prices rises and in the mortgage market there could be a shock for mortgage applicants who have taken out payday loans
Housing market “in the doldrums”
Despite the two surveys from the Halifax and Land Registry we reported on last week showing a small rise in house prices over the past month, the Royal Institution of Chartered Surveyors (Rics) have said that the UK housing market remains in the doldrums with little sign of an upturn in the short term.
The figures from Rics show that 22% more surveyors are reporting house price falls than rises and an increasing number are expecting house prices to fall over the coming year, pushed lower in part, by a lack of mortgage availability, despite all time low interest rates.
Simon Rubinsohn, Chief Economist of Rics, said: “The housing market did not manage to turn a corner last month and activity remained in the doldrums.”
He continued: “Although there is some positivity that the amount of sales going through is going to see an increase, it is unlikely that we will see any real movement until purchasing a property is more affordable and accessible for the likes of first-time buyers.”
Savills predict modest house price increases
The estate agent, Savills, has predicted only modest house price growth over the next five years in all areas of the UK except London.
Savills have predicted that house prices in London will rise by 19% over the next five years, compared to just 6% in the rest of the country.
Mortgages refused to pay day loan borrowers
GE Money, a sub-prime mortgage lender, is refusing to offer a mortgage to people who have taken out a payday loan in the past three months.
Even if the loan was paid back on time, and with no arrears, the sub-prime lender has said it will also refuse mortgage applications where the applicant has taken out two or more payday loans over the past 12 months.
The sub-prime lender is clearly nervous that people who have taken out payday loans represent a greater level of risk than other applicants.
GE Money said: “As a responsible lender in a challenging market, we review a range of data to make prudent mortgage lending decisions. Payday loan data is one of many items included in this review, and if a mortgage applicant has a current, or had a recent, payday loan, it is unlikely that we will consider their mortgage application.”
Mortgage experts have questioned whether other lenders will follow suit, although one, HSBC, who currently have some of the most competitive mortgage rates seem unlikely to do so. A spokesman said: “It doesn’t make any difference to us. If you’ve got outstanding debt it will reduce the amount you can borrow, but that goes for any kind of borrowing. We don’t make a special case of payday loans.”
Mortgage borrowing by first time buyers jumps
Borrowing by homebuyers jumped in May after a slump following the end of the government’s Stamp Duty holiday for first time buyers.
Figures from the Council of Mortgage Lenders (CML) show that mortgage lending for home buyers was up 36% in May compared to April, the month after the Stamp Duty holiday came to an end, and up 29% compared to this time last year.
Encouragingly the increase in mortgages for first time buyers was even greater, up 43% compared to April and 22% compared to May last year. The amount that first time buyers are borrowing has also increased, from an average of £97,750 in April to £104,000 in May.
HRMC have also reported an increase of 11% in the number of house sales completed in the first five months of 2012 compared to the same period last year.
Mortgage experts seem split whether these figures represent something of a recovery for the housing market or are simply an upward blip in an otherwise stagnant picture.
Quoted in the Guardian, Mark Harris, Chief Executive of mortgage broker SPF Private Clients, said: “Now that the distorting effect of the stamp duty holiday is out of the way, the housing market looks to be in better health than previously thought. The number of new mortgages taken out is greater than this time last year, although still some way off the volume of deals done at the height of the market.”
However, speaking to the same newspaper, Richard Sexton of chartered surveyors e.surv took a slight different view, saying: “May reflects a seasonal improvement. Easter is a traditional seasonal high for house sales, and these could just about have fed through into May’s lending figures.”
He continued: “But I’m sceptical that there is a recovery, in fact things have got worse with the Eurozone. The lack of confidence generated by that means the rates at which banks lend to each other has become much more expensive, and this cost is passed on disproportionately where they see more risk (for example) first time buyers.”
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