The Council of Mortgage Lenders (CML) has given further boost to the UK optimists
hopes of a property revival, today reporting that its members have granted 16% more home
loans in April, than were allocate in March. The news arrives as a welcome fillip to a market
uncreasingly uncertain about its future.
The CML, who’s members account for 98 of 100 home loans granted in the UK, said 35, 600 loans were granted in April. This is still 28% behind last years april statistics.
The 16% increase in mortgage approvals were for customers moving from home to home, rather than first time buyers, which gives us an indication of the facts underneath the figures. First time buyers are generally regarded as a market indicator in terms of an upturn in the market. When these increae, it augurs well for an increase in house prices. There was a 13% increae in home loans to first time buyers in the March - April period, signifying a subtle but important potential trend development.
The new statistics also provide an insight into the load-to-value ratios lenders are agreeing to lend at. Last year, the median loan to value rate was 72%, now this year its 67%. Lenders hve also radically reduced their lending terms, which have now come down to 2.63 times a borrower’s income - this time last year, the banks were lending an average of 2.97 - almost 3 times the income.
Historically low
Whilst the new figures do signal a significant upturn in the amount of mortgages being granted, historically, they remain far from the highs of recent years. This april’s 35,600 loans still reflect ah housing market struggling to find a market bottom, and investors remain on the sidelines waiting it out. In the last seven years, the market average for home loans in April was 88,000. There are also signs that many borrowers are switching from there flexible mortgages to fixed rate products, with interest rates at a low. The fixed rate loan applications have risen to levels not seen since july last year. Short term fixed rate loans are now far more appealing that long term variable rates.
These tentative signs can signal a base to start a housing market reform, but have a long way to go to represent a housing market recovery.
First Time Buyers
RICS (The Royal Institue of Chartered Surveyors) Reported that buying enquiries increased in may for the seventh month in a row in the U.K, and economists reporting that with house prices falling and interest rates dropping , there would inevitably be more activity in buying in the U.K. Lending criteria remains tight, inhibiting first time buyers from entering the market, who also have to incorporate stamp duty in their initial purchase, adding more cost to a purchase which many find out of reach. A further drop on house prices of 10% would not be unreasonable to expect over the next 12 months.
Most economic commentators are agreeing that the market remains extremely volatile and the next few months could produce highs and lows. Growing unemployment, low wage growth and a public unwiling to take a chance on house prices, continue to place heavy downward pressure on the houseing market in the U.K. There will invevitably in a very slow, steady recovery, based in the amount of first time buyers entering the market, which remains at a low.
On a global outlook, today the Chief of the IMF, (International Monetary Fund) chief Dominique Strauss-Kahn has suggested that ”The large part of the worst is not yet behind us.” Whilst many commentators in the U.S and the U.K. remain upbeat regarding the worldwide and home economies, there are many factors to be taken into account, with the U.S. providing a forecast for europe as to which way the global housing market may turn next.
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