Housing round up: House prices fall 1% in March and a blow for first time buyers


Housing & mortgage round upA somewhat depressing week for the housing market.

According to the UK’s largest building society house prices fell by 1% in March at the same time mortgage approvals have also dropped and an Interest Only ‘time bomb’ looms.

House prices fall 1% in March

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Figures released by the Nationwide, the UK’s largest building society, show that house prices fell by 1% in March.

The sharp fall in March also means that prices have fallen over the past year by 0.9%; the first time the Nationwide survey has shown a year on year fall for the past six months.

The fall was the largest since June last year and takes the average house price in the UK to £163,327.

The Nationwide said that two factors, the end of the Stamp Duty holiday and the generally poor economic climate were to blame.

Robert Gardner, Chief Economist at the Nationwide, said: “In our view the challenging economic backdrop is likely to continue to act as a drag, with house prices moving sideways or modestly lower over the next 12 months.”

The two year Stamp Duty holiday for first time buyers has now come to an end, meaning that everyone will now pay Stamp Duty of at least 1% on property purchases over £125,000.

Mortgage approvals

The Bank of England has released figures showing that the rise in mortgage approvals in January did not continue into February, again possibly down to the end of the Stamp Duty holiday for first time buyers.

In February 48,986 mortgages were approved, a drop of 15% from January.

Interest Only ‘time bomb’ could affect 1.6 million people

New research from the website Unbiased.co.uk has shown that up to 1.6 million people have an Interest Only mortgage with no repayment vehicle in place to clear the debt at the end of the mortgage term.

Interest Only mortgages rose in popularity in the 80’s and 90’s when Endowments or ISAs (Individual Savings Accounts) were often used as repayment vehicles at the end of the term. However many of these plans have been surrendered, without a suitable replacement being put in place or the mortgage concerted to a Capital Repayment basis.

During the last housing boom many people took on Interest Only mortgages without a repayment vehicle and whilst the FSA is clamping down on the practice for new borrowers it admits it has no solution for those people with an existing Interest Only mortgage.

Karen Barrett, Chief Executive of Unbiased.co.uk, said: “With incomes squeezed, it’s not surprising that many people are trying to save money by sticking to interest only mortgages, but this is a potential ticking time bomb.”

Blow for first time buyers as Skipton pull 95% loan to value deals

In the same week that the Stamp Duty holiday has come to an end the Skipton Building Society has temporarily withdrawn its’ 95% loan to value mortgage deals, in a further blow for first time buyers who traditionally have smaller deposits.

The number of lenders willing to offer 95% loan to value mortgage deals is limited and there are even fewer who will lend on a national basis.

Lenders offering 95% mortgage deals nationally:

Leeds Building Society
Darlington BS
Newcastle BS
Saffron BS
Yorkshire Banks

Lenders offering 95% mortgages in their region:

Ipswich BS
Nottingham BS
Cumberland BS
Monmouthshire BS
Mansfield BS

A spokesperson for the Skipton said: “Since the start of this year we have seen quite an uptake of applications for 95 per cent LTV loans, so as a result what we have set aside for them has been oversubscribed and we have decided to pull out of them for the time being.”

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