Author Archive

Potential first-time buyers are facing rising rents as they wait to raise a deposit for a home, a survey has said.

Landlords raised their rents for the sixth consecutive month as demand increased and supply was squeezed, the poll by LSL Property Services found.

Average monthly rent amounted to £676, although this would pay for renting different-sized properties in different parts of the UK.

A home remains most people's biggest asset in the UK.

The value of properties judged by house price surveys is under the microscope in a new study.

The Office for National Statistics is monitoring the different, officially-sanctioned house price surveys to ensure they do not give conflicting messages.

The review was welcomed by one member of the industry.

Robert Bartlett, chief executive of estate agent Chesterton Humberts, said that it would be good to come up with a system that gave a "timely and accurate" indication of house prices in a local area.

"Prices vary enormously from property type and location," he said.

Analysis of the housing market by accountants PricewaterhouseCoopers suggested that there would be a 2% average real rise in house prices between 2010 and 2020.

However, this would represent a lower rate of increase relative to the average real UK house price growth of about 4% per year between 1984 and 2007 and about 3% per year between 1984 and 2010, it said.

Meanwhile, first-time buyers are still having to find a large deposit to get on the property ladder.

"The biggest issue is the lack of funding," said LSL's managing director David Newnes.

"Is is constraining first-time buyers and investor landlords from coming into the market because of the need for such an enormous deposit."

A number of "accidental landlords" - homeowners who tried to sell but were forced to let instead - were now selling up, reducing the amount of rental property available, he said.

Geography was also a factor in the rental market, with the average rent unlikely to be enough for a property in central London, but possibly enough for a semi-detached home in the Midlands.

Lenders are predicting a slow mortgage market for the rest of the year despite reporting a 5% lift in loans in July.

The total amount of money lent in new mortgages stood at £13.6bn in July, the Council of Mortgage Lenders (CML) said.

This gross mortgage lending, which includes lending to people remortgaging as well as house buyers, was up on the previous month.

However, it was down 3% on the same month a year ago with activity in the market "subdued", the CML said.

The recovery in the housing market in the second half of 2009 had "run out of steam" at the start of 2010, the CML said.

This lack of activity among buyers has also slowed the mortgage market compared with the same period a year ago.

As a result, the CML recently revised its forecast for mortgage lending in 2010 - now saying that it expected gross lending to be at £140bn this year.

It said that mortgage lending in the second half of the year would be slower than it previously thought, not matching the pick-up at the end of 2009 brought about by buyers purchasing ahead of the end of the stamp duty holiday.

Other surveys have painted a similar picture for buyer activity.

The Royal Institution of Chartered Surveyors and the Home Builders Federation both suggested that new buyer inquiries fell relative to new seller instructions for all types of property. The number of site visits and reservations for new homes had also fallen.

Earlier this week, property website Rightmove said that sellers had been asking for lower prices for property as buyer interest had dropped during the holiday season.

Gross mortgage lending was up for the third consecutive month in July, but Andrew Montlake, of mortgage broker Coreco, said the home loan landscape was "by no means close to returning to normal".

"Mortgage lending criteria have toughened, making it difficult for borrowers, particularly the self-employed and first-time buyers who are struggling to obtain the borrowing they require," he said.

"Consumer demand will begin to rise again after the traditional summer lull, with buyers keen to take advantage of low interest rates and a softening of house prices, but I would expect the rest of the year to remain pretty subdued as lenders continue to err on the side of caution."

The Bank of England's Trends in Lending report, also published on Thursday, said that some lenders had reported that the longer-term cost of funding cost of mortgage lending had risen.

With interest rates set to remain at record lows for some months yet, the situation is much brighter for homeowners not looking to move.

Low mortgage costs have been a feature of the last year, staving off arrears and repossessions for some people, even if they have been without work during tough economic times.

"The vast majority of households continue to pay their mortgages in full every month, and many have benefited from the record low interest rates," said CML economist Paul Samter.

"This looks set to continue for some time yet. While there are a range of risks to the outlook, low rates will further help most stay on top of their finances."

The CML represents banks, building societies and other lenders who oversee 94% of all residential mortgage lending in the UK. There are 11.4 million mortgages in the UK, with loans worth more than £1.2 trillion.

The number of homes repossessed by mortgage lenders fell again in the second quarter of the year.

Lenders seized 9,400 properties in April, May and June, 400 fewer than in the first quarter of 2010, according to the Council of Mortgage Lenders (CML).

Repossessions have now fallen for three quarters in a row since they reached a peak of 12,100 last September.

The number of mortgages in arrears also fell, dropping 5% during the quarter to stand at 178,200 at the end of June.

However, the CML's director general, Michael Coogan, said the situation was "far from a healthy all-clear".

"Mortgage difficulties have so far been contained at lower levels than we expected at the start of the year, and by comparison to the 1990s recession," he said.

"However, the safety net for borrowers is weakened by the prospect of higher interest rates, a possible rise in unemployment, [and] reduced government support for mortgage payments."

The CML said it now expected only 39,000 homes to be repossessed this year, down from its previous forecast of 53,000.

That expectation is supported by evidence from the courts in England and Wales where the number of attempts by lenders to seize the homes of defaulting borrowers has fallen again.

In the second quarter of the year the number of possession claims launched by lenders fell by 5% to 17,774, statistics from the Ministry of Justice show.

Apart from a brief rise in the second quarter of 2009, the number of claims has been on a downward trend since the start of 2008, when they reached a peak of nearly 40,000 in the first quarter of the year.

The number of claims that were then granted by the court also fell, down by 7% from the first quarter of the year to 13,389.

That too was far lower than the peak number of more than 28,000, recorded in the last quarter of 2008.

Nearly half of all orders still end up being suspended by the courts, typically to give the home owner time to pay.

The CML explained that despite the apparent improvement in arrears and repossessions, some people with high arrears were still perilously close to losing their homes.

The proportion of all mortgages with the lowest levels of arrears - where payments are behind by between 1.5% and 2.5% of the outstanding loan - has fallen to 0.7%, or 80,100.

But the proportion of mortgage holders with very high levels of arrears - amounting to more than 10% of the outstanding loan - is still stuck at 26,400, or 0.23% of all mortgage holders.

"There is still a significant segment of borrowers whose arrears may have been stabilised through lender forbearance or other support, but whose situation is not improving enough to enable them to claw their way out of problems," the CML said.

"These finely-balanced arrears cases are the ones who may be at most risk of tipping into repossession if there are negative changes such as higher interest rates or reduced benefit support," it warned.

The Consumer Credit Counselling Service (CCCS) warned that repossessions were likely to rise in the coming year.

"A housing market recovery may lead to an increase in the number of repossessions as lenders enforce suspended possession orders after previous leniency," warned Malcolm Hurlston, CCCS chairman.

"This situation is likely to be aggravated in October when support for mortgage interest payments for those who have lost their jobs are halved from 6.08% to 3.09%, to match the Bank of England's average mortgage rate."

House prices are starting to fall, the Royal Institution of Chartered Surveyors (Rics) has said.

Most surveyors had seen no change in the past three months, but those seeing a fall in prices outnumbered those reporting a rise.

It was the first time since July last year that the monthly survey has detected a downturn.

Separate figures showed that growth in UK retail sales slowed sharply in July on fears about government cuts.

The British Retail Consortium said like-for-like sales, which strip out the impact of sales from new stores, rose by 0.5% in the month compared with a 1.2% rise in June.

"After some months of stability within the retail sector, these data are a warning signal that things could be about to take a turn for the worse," said Neil Saunders at research group Verdict.

Rics said more homes were being put up for sale, while inquiries from new buyers had fallen for the second month.

Buyers were finding it hard to get a mortgage, while fear of unemployment was putting off others, Rics added.

"The fall in the Rics house price measure [in July] is broadly consistent with most other recent data that has been released," said Rics spokesman Ian Perry.

"Significantly, the forward-looking price expectations numbers suggest that this softer trend will continue through the second half of the year.

"However, agents are still generally optimistic about sales activity, which should benefit from more realistic pricing of properties," he added.

The recent cooling of house prices has been confirmed by the government's own house price index, published by the Department for Communities and Local Government (DCLG).

It shows that seasonally adjusted average prices were unchanged across the UK in June. This cut the annual rate of increase to 9.9%, from 10.6% in May.

"UK house prices rose by 0.8% in the quarter to June 2010 compared to an increase of 2.8% in the March quarter," the DCLG said.

In the past year, the DCLG figures show that all parts of the UK have seen prices increase, except for Northern Ireland where they have fallen by 8%.

London saw the biggest increases in that time, with values up by 15%.

The Rics survey was based on questions to only 242 surveyors around the UK, who also work as estate agents, but the Rics report has traditionally had its finger on the pulse of the property market.

While 64% of those surveyed had not seen any change in local house prices during the preceding three months, those who had seen rises - 11% - were outnumbered by the 25% who had seen prices drop.

Recent surveys from both the Halifax and the Nationwide have also shown that the upturn in house prices, which started in the spring of 2009, has been cooling off.

That rise had been driven largely by a shortage of homes being put up for sale, but now the balance of supply and demand has reversed.

Rics said its members expect the downward pressure on prices to continue.

"Expectations for house price increases have also turned negative, with 28% more surveyors expecting prices to fall over the coming months," Rics said.

UK house prices have continued to stabilise, according to the latest report from the Halifax.

Prices rose 0.6% in July, the Halifax said, reversing a fall seen in June, but values have changed little since the start of the year.

The annual house price inflation rate fell from 6.3% to 4.9%, with the average property now costing £167,425.

Halifax said that the mixed pattern of prices rises and falls so far this year was "consistent with a slowing market".

It reiterated its view that prices would be "broadly unchanged" over 2010 as a whole.

"The increase in the number of properties for sale over the past few months, boosted by the recent abolition of home information packs, has relieved much of the pressure that was driving up prices in 2009," said Martin Ellis of the Halifax.

After the banking crisis of 2007 and 2008 prices started rising briskly again in the spring of last year, but have been easing off for much of this year.

According to the Halifax, the average house price hit a recent peak in January at just over £169,000 but after falling back slightly since then they are now no higher than they were last November.

The Halifax's survey is showing a very similar trend to that of its rival lender the Nationwide.

Although the building society was less certain about the prospects for house prices this year, when it published its own report last week, its picture for the year so far is very similar to that of the Halifax.

"The Halifax figures confirm that what we are seeing is a stabilisation in the property market rather than, as some have suggested, the beginnings of a sharp correction," said David Smith of property consultancy Carter Jonas.

Mortgage lenders continue to ration the size of their loans to home buyers and people remortgaging.

The number of deals on offer has risen by 66% this year, from 1,414 in January to 2,351 now, says the financial information service Moneyfacts.

But 58% of the deals available still require a downpayment of at least 25% of the value of the home being bought.

And the proportion requiring only a 10% deposit still stands at just 8% of all the mortgages currently on offer.

"There has been no real movement in the overall number of new mortgages available on the market [in the past month], but those that are available continue to be more competitive," explained Michelle Slade of Moneyfacts.

"Many of the best deals are now available for a 25% deposit, having previously only been available for those with a 40% deposit."

Although there has been little change this year in the proportion of mortgage deals requiring smaller deposits, the average interest rate being charged on them has drifted down.

The average two-year fixed rate deal now comes with an interest rate of 4.5% compared to 4.9% in January.

Three-year fixed rates now cost on average 5.2% instead of 5.5% at the start of the year, and five-year deals now cost 5.6% instead of the 6.1% charged in January.

However these figures disguise the very wide difference in the interest being charged according to the size of the deposit being put down.

According to Moneyfacts, a two-year fixed deal with just a 10% deposit comes with an interest charge of 6.2%, but a 25% deposit brings that down to 4.1% while a 40% deposit attracts an interest charge of just 4%.

According to statistics from the Council of Mortgage Lenders (CML), the average first-time buyer is now putting down a deposit of £35,000 to buy a home.

Aaron Strutt, of mortgage brokers Trinity Financial, said there were only four deals on general offer with just a 5% deposit.

And deals from the big banks with 10% deposits were often very expensive.

"RBS have one of the worst rates available for first-time buyers with a 10% deposit - 6.89% fixed for five years," he said.

"You would have to be really desperate to take this rate," he added.

House price inflation in the UK continued to ease off in July, the Nationwide building society has said.

Its latest monthly survey shows that prices fell by 0.5% this month, taking the annual rate of house price inflation down from 8.7% to 6.6%.

The price of the average home is now £169,347, almost the same as it was in July 2008.

Meanwhile, the mortgage market also remained subdued in June, figures from the Bank of England showed.

The Nationwide said price rises were easing off as more homes were being put up for sale.

"At the moment, the market is clearly easing relative to the very tight supply conditions that characterised it since early 2009," said the society's chief economist Martin Gahbauer.

"A combination of restrictive credit conditions and uncertainty about the future economic outlook continues to limit the pool of buyers to those with relatively large financial resources," he added.

Buyers typically still have to put down a deposit of at least 25% to secure a mortgage as banks and building societies continue to ration their mortgage lending in the wake of the credit crunch and banking crisis of 2007 and 2008.

The Nationwide pointed out that the number of completed home sales was still running at about half the level recorded before the credit crunch started.

Since the spring of 2009 prices had been pushed higher again, mainly by a shortage of homes coming onto the market for sale.

However, the Nationwide said it was unsure about where prices were heading.

"It will take several more months to establish whether house prices are now simply oscillating around a flat price trend or whether a period of downward trending prices may be in store," Mr Gahbauer said.

Earlier this month, the Royal Institution of Chartered Surveyors (Rics) said it expected prices to start falling in the second half of this year, as sellers started to outnumber buyers.

And Simon Rubinsohn, chief economist of Rics, reiterated that the institution still thought prices were likely to drop.

"Significantly, all the key forward looking indicators compiled by Rics suggest the headline price indices will continue to slip back during the second half of the year," he said.

"Within this overall trend, however, there will be significant regional divergences - with London, the South East of England and Scotland showing the greatest level of resilience."

The mortgage market has experienced a subdued summer with a drop in approvals in June, figures from the Bank of England show.

The number of mortgages approved for house purchases during the month stood at 47,643, down slightly on the previous month and below the average of the past six months.

It was also 6% lower than the number during the same month a year earlier, which was the first year-on-year fall since April last year.

"It is likely to remain [negative] in future months as comparison is made with a rather stronger market towards the end of last year," said Paul Samter, of the Council of Mortgage Lenders (CML).

Remortgaging was also slack owing to current homeowners enjoying low mortgage rates and tighter lending requirements constraining others, he said.

The Bank of England figures also showed that repayments of unsecured debts outstripped new borrowing in June.

Consumers paid back £98m more than they borrowed on credit cards, personal loans and overdrafts.