A Fall in the Spring

by Mark Johnston

Recent figures from the Bank of England have shown that the number of house purchases has fallen to a new low for the year.  Consumers, it would appear are just not interested in falling house prices, low interest rates and good mortgage deals that are out in the market place today. 

The statistics showed that the number of housing loans approved was down by 4 per cent, representing just over 45 thousand loans for that month.  This would appear to be the lowest figure since 1992, when records first started to be recorded.

Earlier this year, we reported that the Council of Mortgage Lenders (CML) came forwards and said that lending to homeowners had fallen by 29% in January 2011 when compared to December 2010.

The data highlighted that only 28,500 loans were paid in January 2011, a drop of 12%, when compared against the same period last year.  These loans are worth £4.2 billion; this is a drop of 26% by value compared to December. 

The “unusual combination of factors” is to blame; quote from the CML and these depressed figures were not attributed to seasonal factors alone.  The CML pointed to a further combination of factors; lack of confidence in the slow growing economy, a pending new government budget and rising inflation and tax measures.

“With the effects of last year’s government spending cuts beginning to bite, and rising inflation and tax measures putting pressure on household budgets, potential house-buyers are likely to have been discouraged,” the CML said.

“This, coupled with December’s extreme winter weather, and uncertainty over future interest rate rises, has led to a lack of movement in the mortgage market. 

So that was the excuse for a poor show in December and January but what about in April, the weather was remarkably better and we all certainly were not shut up indoors under the mistletoe. 

Some people, some economists are now blaming the low figures on the bank holiday and the recent royal wedding.  I would like to name names but I don’t think they would appreciate 60,000 letters suggesting they hide their university degree. 

Howard archer, chief economist at HIS Global Insight remarked that “The relapse in mortgage approvals in April from an already low level reinforces our belief that modest falls in house prices are more probable than not over the coming months.”

The Mortgage Advice Bureau’s very own Brian Murphy weighed in and said that “The raft of bank holidays and the royal wedding inevitably skewed the April data, so an overall drop in the number of loan approvals and remortgages comes as no surprise. The nation went on holiday.

“During May, activity bounced back and returned to the steady growth trajectory of February and March – albeit one that is naturally still at historically low levels. The ongoing drop in the number of remortgages reflects how people increasingly believe an interest rate rise is unlikely in the short term and that, if one does come, rates overall will remain very low for the foreseeable future.”.  Fantastic news.

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