Despite tentative signs of a recovery in UK house prices the UK mortgage Market looks to be weak. The price comparison website moneysupermarket.com said that the number of mortgage deals on offer to first time buyers continues to remain very low at just over 1,000.
Two of Britain’s biggest house builders have stated that the lack of mortgages presents a major obstacle to recovery. Given the general gloom over mortgage deals on offer, it was rather a surprise to see Nationwide offer a return of a 125% mortgage for those homeowners struggling with negative equity. It is a sign Nationwide are optimistic about house prices for 2010.
The Council of Mortgage Lenders have reported an increase in the number of first time buyers receiving help from parents to buy a house. It seems the recent crash has done little to change the British desire to own a house. If parents are willing to help their children, this could be a factor in increasing long term house price to incomes ratios. Nearly 80% of first time buyers under 30 received help from parents in 2009, compared to 40% in 2006 [report at CML]
Repaying of Mortgages
The period of house prices falls has seen a big shift in repayments. Rather than using housing wealth for equity withdrawal. Home owners have been using the period of low interest rates to over pay their mortgage. It remains to be seen when banks will take advantage of this repayment to start lending more again.
How Long Will Low Interest rates Last?
The Bank kept interest rates at 0.5% again this month, meaning many homeowners continue to benefit from low interest rates. However, with signs of economic recovery and the prospect of inflation, these interest rates may not last much longer. And this is reflected in the rise in fixed rate mortgages
Another issue for the long term, is how changes in the UK Banking system will effect competition and the price of mortgages on offer. The big two mortgage lenders (Santander, Lloyds / TSB / Halifax) now control over 50% of the mortgage market – a worrying sign of market concentration.
Related
Price of New Homes
Redrow said its average selling price was £137,500 – down 12.4% from the previous year. Barratt’s average selling price fell 14% in the same period to £157,000.
2 comments ↓
It is definitely an obstacle with out easy access to credit people are finding it tough. I haven’t seen any signs of recovery just yet but hop that we will see something by mid 2010.
What affect will the Aviva £1bn fund to mass produce rental homes have on the UK property market?
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