Mortgages on the up
Sunday, February 1, 2009
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It may be a small improvement, but the UK housing market is keen to find a glimmer of hope in even the tiniest of positive statistics these days. The cause for celebration is that the number of new mortgages approved for home buyers picked up slightly from 27,000 in November 2008 to 31,000 in December 2008. Unfortunately this is still the second lowest number on record.
The bigger picture shows that lending dropped by 58% in 2008 with 519,000 mortgages approved compared with 1,250,000 the previous year. And lending and industry speculators have warned that banks are still short of funds and as a result expect mortgage lending to decline further.
However HM Revenue and Customs is eager to point out that property sales were on the increase. Their figures relating to completed UK property sales show that sales of properties worth £40,000 or more rose from 52,000 in November last year to 61,000 in December last year.
Conflicting figures abound as the HRMC also stated that sales for the whole of 2008 stood at 930,000 – a 43% decline from 2007 sales figures.
Reasons for the slump are many and varied and include rising unemployment levels, the tightening up of banks’ lending criteria, mortgage rate uncertainty and, somewhat paradoxically, falling house prices. Falling prices would usually mean more sales, but shrewd buyers are choosing to sit tight and see just how far market prices will drop before parting with any of their hard-earned cash.
But there may well be a glimmer of hope hidden in there somewhere as speculators note that recent activity within the housing market hints that the market may be about to pick up. The number of sales recorded by HMRC in December of 2008 was the highest in five months. The Bank of England interest rate cuts have also led to cheaper mortgage rates.
Looking at the Alliance & Leicester's mortgage rates, the Bank of England cut has encouraged them to drop their standard variable rate to 5.34%, as well as to introduce a two year base rate tracker mortgage with a rate of 3.99% on 60% LTV mortgages. Market experts believe that these mortgage rate cuts, combined with falling house prices, is finally beginning to tempt buyers back into the market again.
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