by Mark Johnston
Mortgage approvals have fallen for the sixth month in a row as the UK housing market continues to struggle in a difficult economic climate. Last month 47,185 home loans were taken out, the lowest number since the beginning of the year.
Industry insiders are worried that the lack of stability in the market is causing house prices to drop which is putting buyers off from moving home. A new report also highlighted that house prices had fallen for the fifth month in a row, this together with news that the number of people looking to buy a property dropped to the lowest levels in two years shows signs of an every weakening property market.
It seems that potential first time buyers and home movers are biding their time before they make any decisions to move so that they see how the market moves. This together with fears of how the proposed government spending cuts will affect home owners is having a severe impact on the UK housing market. It’s also worth remembering that even when buyer do decide to take the step to purchase a property in the troubled market, lenders have tightened their criteria so much that would be home owners are finding it difficult to secure a mortgage.
The shortage of first time buyers getting mortgages or looking to buy together with an increased number of house going up for sale is driving prices down in the UK house market. Most industry watches seem to agree that the market will probably flatten for a while with the potential of a slight drop, its debatable how much this drop might be, some predict around 2.5% whilst other suggest 6% and more.
The chief UK and European economist at IHS Global Insight, Howard Archer recently said: “The Bank of England mortgage approvals data shows that housing market activity remains marooned in the doldrums, which seems highly likely to maintain downward pressure on prices. The data reinforces our belief that house prices will trend down to lose around 10% from their peak 2010 levels by the end of 2011.”
Another expert of the UK economy at Capital Economics said: “October’s UK household borrowing figures provide yet further evidence of the troubles in the housing market. With housing market activity this weak, we suspect that the recent house price falls have much further to go.”
Although market news always seems to be doom and gloom, there is always some positive news of growth to balance things out. Net lending was up in the month of October to £1.25 billion which was a big jump from the £246 million in September. Lenders also reported an increase in the number of people re-mortgaging which hit 29,275 last month.
Adrian Coles, director-general of the BSA, said: “Reports of falling house prices and Government spending cuts have lowered consumer confidence, which has put further downward pressure on demand for mortgages. An encouraging trend in recent quarters, however, has been the growth in mortgage approvals at mutuals and this may lead to some recovery in mutuals’ market share over the next few months.”
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