24 June 2008 12:01

APRIL was the cruellest month for the housing market - the time when everyone with a stake in rising house prices realised that there would be no Spring bounce to come to their rescue. But things got even worse in May, according to new mortgage figures released by the British Bankers Association this morning.

Mortgage approvals for house purchase were down a staggering 56% on May last year - much worse than the 35-40% fall in loans and transactions seen so far - and by 20% on awful April. Approvals are one of the lead indicators for the market and they are signalling that prices will continue to fall and that the rate of decline may get even steeper.

We have also reached the point where, thanks to price falls, the value of loans approved is falling faster (57% over the year) than the number of loans.

With figures like this at the normal peak of the house buying season, any first-time buyer and anyone thinking of trading up would have to be very brave or very foolhardy to take the plunge. Add in the continuing shortage of mortgages, and higher rates for those that are available, and the market will continue to seize up. 

Posted by Jules Birch, June 24

Posted in Housing market, Mortgages

27 May 2008 13:02

IT takes a brave pundit - or an estate agent - to predict an end to the downturn in the housing market.

Two surveys released this morning showed continuing downward pressure. Hometrack's latest monthly survey shows a 0.5% fall in prices in May and research director Richard Donnell detects a continuing 'buyers' strike' as the number of buyers registering with estate agents fell 6.7%. That follows a 0.6% fall in prices in April.

And the British Bankers Association revealed that although mortgage approvals in April were up slightly on March they were 39.1% down on a year ago.  Remortgaging increased as existing owners sought new loan deals.

But the National Association of Estate Agents attempted to buck the trend with a claim that the market is 'stable' before quickly adding that 'consumer confidence is still shaky'.

Just as a house with a leaking roof and dry rot is 'in need of modernisation' so an increase in the number of homes on agents' books and the number of sales falling through becomes 'property supply is good'.

In my high street at least, that property supply includes shops left vacant by a dwindling number of estate agents. 

Posted by Jules Birch, May 27 

 

 

Posted in Estate agents, Housing market, Mortgages

29 April 2008 12:28

WHAT can you get for £50bn these days? Not much, if the news coming out of the housing market this week is anything to go by.

New figures released by the Bank of England this morning show why it felt obliged to pump that amount of liquidity into the system. Mortgage approvals fell to just 64,000 in March - the lowest since monthly records began in April 1993.

But that is the past. Surely the future is looking more rosy after the Bank's decisive action and chancellor Alastair Darling's meeting with leading lenders last week at which he urged them to pass on the effects of interest rate cuts to borrowers?

Instead, as this week's papers report ad nauseam, lenders are still increasing their rates, reducing loan to value ratios and withdrawing riskier deals like interest-only mortgages. As one lender withdraws its best deals, so the others find themselves swamped by demand and forced to follow suit.

And what of the banks who met Darling? HBOS increased rates for many new customers by 0.6% last week. Nationwide will now only offer its best variable rate to customers with a deposit of more than 25%. And Abbey will only give interest-only mortgages to those with deposits of more than 50%.

The moves left pundits struggling for words. One said it took the market back to the days before it was liberalised in the late 1980s. Another said it was the biggest change since the Second World War.

Posted by Jules Birch, April 29 

 

Posted in Mortgages

21 April 2008 13:06

IN the last housing market bust, mortgage rescue was a modest scheme to let social landlords buy the homes of owners facing repossession and then rent them back to them. Fast forward 16 years to this morning's announcement by the Bank of England and the rescue is rather more substantial - £50bn worth - and the things being saved are rather different too: the banks, the housing market in general and quite possibly the government's prospects at the next election.

Only time will tell if the Bank's special liquidity scheme will work as intended by freeing up lending and return the mortgage market to normal (whatever normal means). However, it's introduction is a stark indicator of just how quickly the official attitude to the mortgage famine has moved from complacency to measured concern to, if not quite outright panic, then something close to it.

The BBC's financial editor Robert Peston argues on his blog that the cost could easily rise to £100bn - a sum so large that the government has had to indemnify the Bank against any losses - and that the package is about preventing another Northern Rock and stopping the current crisis turning into something even worse.

And political reaction has been quick to pick up on that point. The key point for Vince Cable of the Liberal Democrats was that the banks and not the taxpayer should be covering the cost of any losses. 'We cannot have a situation where the banks are able to privatise their profits and nationalise their losses,' he said.

Initial reaction from lenders was cautious. CML director general Michael Coogan was keen to stress that banks would be paying an 'appropriate price' for the facility and warned: 'The improved liquidity is unlikely to reverse the trend to higher mortgage costs we have seen in recent weeks.'

Under the scheme, the banks will temporarily swap packages of mortgage and credit card debt for government bonds. According to the Bank of England, the banks retain the risks of any losses and cannot use the swaps to finance new lending. 

For every £100 of debt the Bank will swap between £70 and £90 of bonds, arguing that means the only risk of a loss to the public sector is if another bank were to go bust. However, another way of looking at that margin is that the Bank is insulating itself against a fall in house prices of between 10% and 30%.

The whole thing certainly puts the sort of mortgage rescue attempted in the early 1990s into perspective - but expect to hear more about that in the near future. The Welsh Assembly government is promising measures to allow housing associations to buy existing homes and rent them back to their owners - with protection not available to victims of private sale and rent back scams. It would be very surprising if a similar idea was not discussed at tomorrow's meeting between lenders and Alistair Darling and Caroline Flint.

Posted by Jules Birch, April 21

Posted in Housing market, Mortgages

14 April 2008 13:33

Mortgage lenders meet Gordon Brown for breakfast tomorrow to discuss the credit crunch but it's already clear that one thing will not be on the menu alongside the croissants, coffee and orange juice. A healthy helping of humble pie from bankers and politicians alike would do more to help find a solution to the growing problems in the housing market than all of their statements and speculation about who is to blame.

Instead the weekend papers were full of pleas from lenders for extra funding from the Bank of England and calls from the government for them to pass on the full effects of lower interest rates to their customers. 

Council of Mortgage Lenders chairman Steven Crawshaw told its annual lunch on Friday: 'We need the tripartite authorities to help us sustain the successful, vibrant, innovative and competitive mortgage market which we ave developed since the recession in the early 1990s.'

He concluded in upbeat mood: 'We still have much more choice than we ever had before deregulation and the entry of specialist lenders into the market.   We still have many consumers wanting to become home owners, given the opportunity.  So let us continue to demonstrate to those who would criticise us that we are working for our customers, our industry, and the economy more generally through thick and thin, in good times and bad.'

The CML wants the Bank of England to kick-start the market in mortgage-backed securities so that banks start lending to each other - or face the possibility of mortgage lending falling by half this year. Writing in the News of the World yesterday, Gordon Brown called on the biggest banks to 'come clean' on their bad debts and promised extra government help if they do.

But both positions seem based on the assumption that the credit crunch is a temporary blip and that once confidence is restored it will be business as usual. It may be one step on from arguing that there is no problem in the UK but it still sounds like what it is: denial.

Back in the real world, evidence is growing of the impact of the crisis throughout the market: from home owners facing repossession to housebuilders with plummeting share prices to estate agents facing a wave of closures. 

Posted by Jules Birch, April 14 

  

 

Posted in Housing market, Mortgages