The number of loans approved for house purchases in June was just 21,118, a drop of 23pc compared to May, according to the British Bankers’ Association. Since June last year, mortgage approvals have dropped significantly (64% on last year. This slump in the mortgage sector reflects the current credit crunch, lack of confidence and concerns over falling house prices. Banks have tightened up their criteria for lending. In particular the amount of deposit required has increased alot.
- The number of remortgages have fallen by 13%
- The number of households using their house for equity withdrawal fell by 37%
The slump in mortgage lending has been a powerful influence on house prices. House prices have fallen 17% in past 12 months and further falls are likely with the housing market showing its quietest volumes since the early 1990s.
These figures will put pressure on Government to take further action to bolster mortgage lending.
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Metro newspaper today stated that recent July figures show that house prices have fallen again for the tenth time in a row knocking 1.2% off their value, figures show today. Values have slumped 4.4% in the past year the fastest annual rate of declinesince property intelligence group hometrack first launched its index in 2001.
The average price is now £168,500 the same as in October 2006.
The number of people registering with estate agents in July fell 6.4% following a 5.7% drop in June, said Hometrack.
At the same time the number of properties rose 1.1% and homeowners were getting just 91% of their asking price.
“With no immediate end in sight to the current uncertainty activity levels are likely to remain surpressed, wiht prices remaining under pressure into the autumn,” said Richard Donnell, Hometrack’s research director. But the downturn could be over by 2010.
The average cost of a home will bounce back to £274,700 by 2013, a rise of 63 percent on todays gloomy figure, a study for the National Housing Federation Showed.
But the NHF study expects prices to drop 2.1 per cent in 2009 before turning a corner in 2010 and rising fast.
Despite the crisis, demand for property is still growing, while the supply of new housing is falling, the study carried out by the Oxford Economics showed.
At the moment everybody’s talking about the deteriorating state of the UK economy. Will we head into recession? Are we already in one? Whats my property worth? Will I be able to remortgage? What rate will I be looking at? How bad are things going to get?
The government, the Bank of England, the FSA, mortgage lenders, building companies will all tell you their side of the story, often with very conflicting views.
I thought it would be a good time to write and tell you all what I think is happening given what I’m seeing, reading and experiencing on a daily basis.
Its a nightmare!! Ha!
No. It’s not that bad really. As long as in the short term you are able to hold onto your job.
There’s many factors at the moment that have to be taken into account when trying to work out the economical future of the country. Property prices, oil and food prices, inflation, Mortgage rates and inter bank lending rates are some of the factors that need to be taken into account.
It all seems to also be centered around the property market and property is a good gague of how we are doing.
Everyone is talking about house price crashes and things continually getting worse. Which they will. But house prices have already crashed. The true drop however has not been realised yet as the figures are fudged due to not many properties selling.
Inflation is on the up so the normal thing for Mervyn King to do would be to put the base rate up. This would probably only cause more problems however. Not a good idea as then borrowers would be in more trouble and we would all be embarking on a very slippery slide.
They should hopefully stick at 5% for a while longer while the dust settles.
The credit crunch problem is caused by the lenders being so tight with their money. They are fuelling the whole scenario as they are unsure of the losses that they have already incurred. In the past when mortgages were written and sold the lenders could sell on their mortgage books to other companies. They can’t do that anymore as no lender feels safe buying another companies books that could be full of mis-sold mortgages. They don’t even know exactly what business they have on their own books let alone the books of another company. For this reason the lenders refuse to lend to eachother. This means they each have less money to lend to you.
It’s easing up though. The lenders are slightly less cautious already and some are offering one off products for short amounts of time to get in good business. Then they close their doors again. I can find these rates for you.
When the lenders are happier that properties have close to bottomed out they will reduce their rates significantly and start lending again as lending will be far less risky. They also as mentioned earlier need time to see what bad business mortgages they have on their current books to assess their real financial situation.
We should see about another 15% drop in house prices between now and April and next year, hopefully then we’ll see house prices stabilise and start moving up again in value.
As confidence in the property market increases the builders will be back to work along with many other professsions linked to property. The knock on effect will gradually reach all businesses and the frequency of redundancies should begin to fall.
If you’re looking to buy at the moment my advice is to put crazy offers in. You’ve got nothing to lose. You’ll lose money on the rate as they’re pretty high but you will save money on the price. There are some real bargains out there and if you’ve got good income and a good deposit it’s a great time to buy.
If you are looking to sell. Good luck and take what you can while you can. If you have got time to wait and do the place up you could be onto a winner. Builders are feeling the crunch and you should be able to negotiate your price.
If you are looking to go into negative equity act now before you do and get an extension done to improve the value of your home to curb it.
100% borrowing and above is a thing of the past. Try to remain in the green.
I hope this is helpful. If you want to keep receiving updates such as this one please become a fan of Hurleys Mortgage & Financial Solutions please click on http://www.hurleysfinancialsolutions.com and goto enquiry online. From there you can request information and advice or leave your contact details for calls/mailings. I will then be able to keep you up to date with any changes and other information on the mortgage and property market that could be of interest to you, or that you specifically require.
I look forward to hearing from you.
Jason Hurley BSc Hons FPC, CeMAP
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