Housing round up: Interest rates remain unchanged, but don’t expect house price rises in 2012

The Bank of England kept interest rates on hold last week, however despite unprecedented low interest rates the housing market is still subdued, hampered by tight mortgage lending criteria and nervousness about job security.

Interest rates kept at 0.5%

Although there was no serious concern that interest rates would be increased, mortgage borrowers will have still breathed a sigh of relief at Thursday’s news that the Bank of England’s Monetary Policy Committee (MPC) have decided to leave Bank Base Rate at 0.5%.

The MPC have made no change to Bank Base Rate since March 2009 and experts predict that with the economy still struggling, disappointing consumer spending and the ongoing Eurozone crisis any rise in rates in the short term is unlikely.

This will come as a relief to mortgage holders, many of whom are now used to low interest rates, which have helped their household finances over the past couple of years at a time when inflation has outstripped pay rises and benefits have been cut.

In addition the Bank decided not to increase the existing program of Quantitative Easing.

Property market surprisingly resilient

Following figures released by Halifax and Nationwide which showed only small variances in house prices during 2011 further data has been released which shows the UK housing market remained remarkably resilient in 2011.

Figures from the Agency Express Property Activity Index show that the number of properties with ‘sold’ status fell by just 2.8% in 2011 when compared to 2010.

However, the number of properties newly listed as ‘for sale’ decreased further in 2011, down by 5.2% on the previous year.

As usual the headlines mask large regional differences with five out of 12 regions showing an increase in the number of properties marked ‘sold’. As usual London was the UK’s hottest property region up 13.5% on 2010; the other regions which showed a rise were Wales, up 12.0%, West Midlands, up 6.4%, East Anglia, up 3.2% and East Midlands, up 1.6%.

The North East saw the largest drop in properties marked ‘sold’ falling 14% in 2011 compared to 2010; other areas badly hit included Yorkshire, down 12.3%, Central England, down 9.3%, Scotland, down 8.0%, South West, down 7.8%, South East, down 7.0% and the North West, down 2.8% on 2010.

In terms of new ‘for sale’ listing only Wales showed an increase in 2011 with a rise of 7.1%.

Stephen Watson Managing Director, Agency Express, said: “2011 has been a very challenging year for the UK property market. A potent cocktail of government austerity measures combined with the Eurozone banking crisis, a lack of affordable mortgages and growing pressures on household finances have all seriously impacted on the market.”

“Despite all these factors though, our Index shows that 2011 has managed to hold its ground against 2010 and across several regions, actually produced positive growth which is very promising.”

Looking ahead to 2011 Mr Watson said: “I believe we have another challenging year ahead as the factors impacting 2011 will still be in play throughout 2012.”

He continued: “There are a few key issues that will help the market this year; I believe the stamp duty tax ‘window of opportunity’ which closes end of March should help kick start the first-time buyer end of the market; Interest rates must remain low but more importantly, mortgage lenders must continue to be creative in the packages they produce; UK economy must evidence some form of crisis stabilisation to reinstall some consumer confidence.”

HSBC chooses your Solicitor

If you arrange your mortgage through HSBC you will no longer be able to chose which Solicitor you use.

Previously HSBC customers could chose their own Solicitor, who would act for them as well as the bank, however after warnings of mortgage fraud from the National Fraud Authority and instructions from the FSA, HSBC customers will be forced to use one of a panel of Solicitors.

HSBC believe that using Solicitors approved and known to them will help to reduce the possibility of mortgage fraud, however consumer groups are worried that this will ultimately reduce choice, cause disruption to home buyers and could increase costs.

HSBC is not the first lender to reduce the size of the panel of Solicitors they will work with, both Santander and Nationwide, two if the UK’s largest mortgage lenders, have reduced the size of their panels. However, none have gone quite as far as HSBC, reducing the number to just 43 firms and there are concerns about the capacity of the chosen Solicitors to handle demand.

Chief executive of the Law Society Desmond Hudson said: “Although HSBC has a relatively small share of the mortgage market, such a low number of firms could struggle to provide for all consumers, those who struggle to communicate other than in person or those who would prefer to use a local solicitor with the service they seek.”

Hudson continued: “The disabled, those living in rural areas or even those wishing to simply use their family solicitor will either have little choice but to opt for the same solicitor as HSBC – one of their panel firms – or pay twice over, for their own solicitor as well as HSBC’s legal fees.”

Despite concerns over the lack of choice, service, and cost HSBC insisted the move would actually benefit their mortgage customers. Head of mortgages at HSBC, Peter Dockar, said: “Our new panel arrangement will spare customers the time and hassle of searching for a firm to do the important conveyancing work on their new property.”

He continued: “Customers who choose to use a firm on the panel can benefit from agreed conveyancing costs as well as valuable guarantees should the seller pull out.”

Eddie Goldsmith, chairman of the Conveyancing Association, said: “Ultimately, it could be good news for consumers as it means that the firms that stay on lenders’ panels will be those who offer high quality standards and a superior service.”

However, he added in the short term HSBC’s move would cause “inconvenience and extra expense” for customers who wanted to use the solicitor of their choice.

Flat housing market predicted in 2012

A new report from the Royal Institution of Chartered Surveyors (Rics) predicts that despite a rise in the number of homes being listed for sale the UK housing market will remain subdued in 2012.

The number of new listings rose for the third month in a row but Rics believe the housing market is being held back by sellers asking unrealistic prices for their property.

The Rics survey also showed that house prices fell further in December, but the fall has slowed to the lowest rate since June 2010. London was the only region where prices rose, whilst Humberside, Yorkshire and the West Midlands saw the largest falls.

Ian Perry, housing spokesman for Rics said: “The increasing number of prospective sellers who placed their homes on the market in December is a positive development, as a lack of stock has been a big issue in some parts of the country.”

He continued: “But with sales expectations remaining flat, it is important that vendors are realistic in their pricing if they wish the sale to go through in good time.”

Property experts are generally agreed that tight mortgage lending criteria it the main drag on the UK housing market, whilst the generally weak economy and rising unemployment are also factors impeding growth.

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