“It was the best of times, it was the worst of times”
There is no doubting that the UK housing market is facing the worst of times with rising repossession, falling house prices and a collapse in property transactions. But, amidst all the doom and gloom, some mortgage owners will have to admit they have never had it so good. Interest rates are at a record low. It means that those on variable mortgages are benefitting from a substantial fall in monthly payments. Even if your bank is reluctant to pass on full rate cut, interest payments have fallen significantly.
For those lucky enough to choose a tracker mortgage, they are facing the prospect of £0 interest payments. This is a huge rise in disposable income. It is a complete contrast to the last housing crisis when interest rates reached double figures causing mortgage payments to become unaffordable.
However, whilst existing homeowners benefit, this does little if anything for those on the outside. Mortgage payments may be very low, but, the difficulty is getting a new mortgage at all. In fact some banks and building societies are complaining that with interest rates so low they can’t attract savers and gain the funds to lend new mortgages. With house prices falling, mortgage lenders are taking the extra precaution of asking for a big deposit. It is this difficulty of getting a mortgage that has caused a dearth of first time buyers, a fall in property transactions and falls in house prices.
However, amidst all the unrelenting grim news, there was a little recovery in December. The number of approved mortgages rose for the first time in many months (admittedly from a very low base)
The Bank said net lending was 1.9 billion pounds ($2.7 billion) in December compared to 834 million pounds in November.
That was still way below levels a year earlier. In December 2007 net lending was 7.7 billion pounds.
This may be a one off blip. But, if it is the start of recovery in mortgage lending that would be very good for the housing market.
As the Halifax points out, mortgage affordability for first time buyers has improved significantly in the past 18 months. Nevetheless, some still predict large house price falls because of the moribund nature of the mortgage lending market.
