Property: Lending and house prices stay flat

12th July 2011

The Royal Institution of Chartered Surveyors (Rics) has released figures showing that prices continued to fall and that sales rose "marginally".

The BBC News website also reports the number of enquiries from potential new buyers was unchanged while the number of homes put up for sale fell slightly.

Figures from mortgage industry body, CML show that the mortgage market is stabilising.

The number of loans for house purchase and remortgaging both increased in May, but lending volumes are still weak on a historic basis.

There were 41,500 loans worth £5.9 billion advanced for house purchase in May, up from 40,800 (£5.9 billion in value) in April.

Despite the monthly increase in house purchase activity, it is still below the level seen in May last year (43,800 advances worth £6.3 billion).

The number of remortgage loans advanced in May increased both in number and by value compared to the previous month.

There were 29,000 remortgage loans worth £3.6bn advanced in May. This also represents an increase of 11% by number and 9% by value compared to May 2010.

The CML found that the majority of borrowers continued to opt for fixed rate mortgages in May (62%), saying that it's likely borrowers prefer the certainty of mortgage payments in a period when future interest rate movements are uncertain.

Only 22% of all borrowers chose tracker mortgages in May. This represents a significant change from May a year ago when fixed rates were less popular at 46% and tracker mortgages more popular at 36%.

Commenting on the figures, David Whittaker, managing director of Mortgages For Business, said: "The lack of movement in the number of first-time buyer loans has put mounting pressure on an already over-loaded private rental sector. Tenants are scrapping for properties and rents are climbing as a result.

"This has provided more opportunities for professional landlords and property investors to capitalise on stagnating property prices, rising rents and increasing numbers of BTL mortgage products. Now is a prime time for investors to be considering their options and with the end of summer rental rush not too far away we expect investors keen to boost their portfolios to do so soon."   

Chris Gardner, a mortgage expert at mortgage brokers Obligo said the CML talks of a stable market, but that stable is really a euphemism for flat.

 "The extreme caution of borrowers is highlighted by the popularity of fixed rate mortgages despite the fact that rates are unlikely to rise any time soon," he said. "Many households are in a position such that they cannot even afford to gamble on rates. They have to play a conservative hand and opt for a fix.

"On a more positive note, we are seeing more products and better products come to market, but you still need a solid credit history and a decent deposit to secure them."

To receive our free weekly email sign up here.  

Leave a Reply

Your email address will not be published. Required fields are marked *