Money News

Mixed messages from the housing market

By Martin Fagan - news@consumerchoices.co.uk

Depending who you ask, mortgage lending is up, housing market “flat” but “prices will be subdued for years”.

Housing data released by several respected organisations gives a contradictory picture of the current and future direction of the UK property market.

On a positive note, the number of loans for house purchases and remortgages both increased in May, reflecting a mortgage market that appears to be stabilising, according to figures from the Council of Mortgage Lenders (CML).

The latest figures from the CML showed there were 41,500 loans worth £5.9billion for house purchases in May, up from 40,800 in April. This was below the level seen in May last year though, when 43,800 loans were approved, worth £6.3billion.

Reflecting borrowers' preference for certainty when the future of the economy is still in the balance, the majority of borrowers (62%) opted for fixed rate mortgages while 22% chose tracker mortgages. The CML said this was a significant change from May 2010 when fixed rates were less popular at 46% and tracker mortgages more popular at 36%.

A neutral stance was taken by the Royal Institute of Chartered Surveyors (RICS), which said demand had been “broadly flat” for the first six months of 2011. RICS members report that, because the market remains difficult to access, the only buyers who can really be considered serious are those who have already sold their property, or have a mortgage agreement in place.

“With continued uncertainty over the jobs market and the economy, this subdued picture is set to continue,” said RICS housing spokesperson, Alan Collett.

“London, however, remains a market apart with both sales and prices showing a greater degree of resilience."

Taking a pessimistic view is the latest UK Economic Outlook report from accountancy giant PricewaterhouseCoopers (PwC), which predicted house prices will remain subdued for a number of years. The analysis points to only a 12% chance that real house prices will have grown back above their 2007 peak by 2015. Even by 2020, PwC says there is only a 50% chance of a real house price rise relative to 2007.