by Mark Johnston
Yesterday’s spending review announced some welcomed good news for borrowers which may kick start a recovery in the housing market. The Council of Mortgage Lenders (CML), the industry’s trade body, felt that the plans announced in the spending review were a positive step towards stability in the market.
The industry has had a turbulent time recently with mortgage approvals reaching a ten year low and house prices dropping month on month. Many have blamed consumer concerns in the lead up to the spending review announcement. Now that the government has announced its plans, its hoped that the market will pick up and start to recover by the start of 2011.
The Council of Mortgage Lenders welcomes the lib-con coalition government’s plans to extend the temporary concessions on mortgage interest. They hope that this will entice buyers back onto the market and bolster market confidence which has taken a battering during the downturn.
The extension will mean that the £200,000 limit and the thirteen week waiting period which is down from thirty nine weeks will be in place until January 2010.
The news comes at the same time as September mortgage lending shows the lowest it has been in the last ten years. This is yet another sign that the UK housing market is in trouble. Fears are growing that the UK will see a house price crash if things don’t change quickly.
Septembers figures showed that almost £12 billion was lent in the month of September which was 1% less than the month before in August. The Council of Mortgage Lenders highlighted that the last time figures were so low was back in September 2000.
Michael Coogan a spokes person fro CML said: “Lending volumes do not seem likely to increase substantially towards the end of the year. Funding pressures on lenders remain with a resulting impact on consumer confidence,”
Andrew Standford of cluttons’, a residential consultancy said: “While the number of mortgage products has gradually increased, lenders remain unwilling to lend at high LTV ratios and at high income multiples. Such constraints have resulted in a fall in the number of mortgages approved for home purchase which now stands at less than half the number seen pre-recession, and almost 10% down on the same point last year. Furthermore, as more information has emerged on the Financial Services Authority’s proposed new rules on lending, it is apparent that the market for a range of borrowers who would have qualified in more normal times may be more limited than initially anticipated. Additionally, the need for financial institutions to repay the various support schemes and replace the funding with more expensive funding from the open market, which will increase costs of finance and restrict availability, could potentially make the situation worse,”
Even if the announcement of the austerity measures temps some buyers back into the market it probably wont be enough to give the market the jump start it needs. The loss of 490,000 public sector workers will add to the existing fears of many that see moving home of purchasing a property something that they can put off until they feel more secure.
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