Approved Mortgages Lower in January
The number of mortgages approved rose slightly during January but lending levels were still 43 per cent lower than in the same month a year ago, figures indicate today.
A total of 23,376 mortgages were approved for house purchases during the month – the highest for four months and up from 22,416 in December, the British Bankers’ Association said.
However, net mortgage lending, which excludes redemptions and repayments, fell to its second-lowest level since April 2001 at £2.9 billion in the month – nearly half that in January 2008.
The value of total mortgage advances made in January was unchanged from December at £9.9 billion.
There was also a slight increase in the number of people remortgaging, with 30,710 loans approved for people switching to a better deal during the month, up slightly from 30,500 in December but still 60 per cent lower than 12 months earlier.
There has been a steep fall in the number of people taking out a new mortgage when their current deal ends, partly because house price falls have left many people without the big equity stakes lenders now demand to get the best rates.
Historically low interest rates have also led to steep falls in lenders’ standard variable rates, which most borrowers revert to when they come to the end of a deal, meaning many homeowners are better off staying where they are.
The BBA said: “January’s approval activity, both in volume and value, was marginally above December but continued to be at a very low level.” It added that lower borrowing costs and falling property prices had “underpinned” demand for mortgages from the high street banks, which it said were providing more than two-thirds of new mortgage lending.
Howard Archer, chief UK and European economist at IHS Global Insight, said that the modest rise in approvals last month was further evidence that housing market activity may have bottomed out.
But he warned that further “significant” falls in prices were likely: “Furthermore, while latest survey evidence indicates that buyer inquiries are now picking up significantly as people are attracted by lower house prices and the Bank of England slashing interest rates, we are sceptical that this will lead to a marked rise in actual sales soon.”
Demand for unsecured credit remained subdued during January. Consumers spent £6.1 billion on their credit cards, in line with previous months. But when repayments of £6.3 billion were taken into account, outstanding credit card debt rose by £253 million – slightly up on the previous six-month average.
Borrowing through overdrafts and loans fell by £111 million in January, the third month in a row in which it has declined. There also was a steep fall in the amount of money people had saved during the month, with deposits dropping by £2.2 billion in January.
The BBA said that this partly reflected people spending their savings but was also due to them moving their money into alternative, higher yielding assets, following the reduction in deposit rates.
Don’t hold your breath for house price rises
By Sharlene Goff
Published: February 13 2009 16:54 | Last updated: February 13 2009 16:54
Homeowners are being warned that house prices still have a way to fall, in spite of tentative signs that the property market may be stabilising.
Halifax sparked a burst of excitement last week when it reported that house prices had risen in January, albeit by just 1.9 per cent, compared with December.
Since then, Primelocation.com, the property search site, has reported a slight recovery in asking prices in recent weeks, and a number of estate agents have said they are receiving higher numbers of buyer inquiries.
But economists are keen to emphasise that a recovery in house prices is not yet on the horizon. “Even in the downturn in the 1990s, there were occasional months when prices rose,” says Martin Ellis, housing economist at Halifax. “We don’t want to encourage people to get too excited. We still expect a difficult year – unemployment is rising sharply and people will remain cautious about property prices.”
Most house price data suggest prices are still tumbling. The FT House Price Index this week showed a 1.4 per cent drop in average prices in January, compared with December, while Nationwide recorded a decline of 1.3 per cent.
Fionnuala Earley, chief economist at Nationwide, says there is nothing to suggest house prices are recovering at the rate reported by Halifax.
“There has been a pick-up in buyer inquiries, but there still has not been a big pick- up in approvals and we would need to see that before there was any recovery in prices,” she says.
A better gauge of the market is looking at prices across three-month periods. The Halifax data showed a 5 per cent decline in the three months to the end of January, compared with the final months of 2008. Nationwide recorded an average drop of 4 per cent in the three months to January, a slight improvement on the period ending in December. Indices show that prices have fallen by 12-16 per cent in the past year.
Estate agents say December was a particularly quiet month, which may have skewed the most recent house price data.
Halifax and Nationwide adjust their data to account for the type of sales taking place each month. So, for example, if a higher number of large, more expensive properties were sold in December than January, this should not affect the overall house price data.
“We look at a lot of information – such as what type of property it is, where it is and how many rooms it has – and essentially fix a value on each characteristic to compare properties on a like-for-like basis,” says Ellis.
The lenders also smooth out the data if there has been a disproportionate number of sales in one area.
But discrepancies between the indices are not uncommon. Each is based on a different sample of sales. In the case of Halifax and Nationwide, the figures are taken from the properties they provide mortgages for, so their indices will not always be in sync.
Estate agents expect further price falls of around 10 per cent this year. Knight Frank forecasts that central London prices will fall 30 per cent from their 2007 peak. Also, while there has been evidence of more buyer inquiries in recent weeks, few of these are yet translating into sales.
Knight Frank believes the number of properties coming to the market will increase as more vendors accept there is not going to be a swift recovery in prices, but that this will take time.
Home repossessions reach highest level since 1996
Home repossessions rose to their highest level since 1996 last year, according to data released on Friday.
There were 40,000 repossessions in 2008, up from 25,900 the previous year.
The total number of repossessions was equivalent to 0.34 per cent of all outstanding mortgages, the highest proportion since 1996, at the tail end of the last housing bust, when the figure was 0.4 per cent.
The 1990s housing crash saw repossessions rise to a peak of 0.77 per cent of outstanding mortgages in 1991.
The Council of Mortgage Lenders, which compiles the data, said that there was a sharp rise in cases where borrowers handed back their keys or abandoned their properties.
However, although last year saw a sharp rise in repossessions, the final quarter of the year showed a 6 per cent decline after rises of 18 per cent and 11 per cent over the two preceding quarters. But there were still 10,400 homes reposssessed in the quarter, sharply up from the 6,900 level of the same quarter a year earlier.
The CML also said that the annual figure of 40,000 repossessions was 5,000 lower than it had expected.
But it maintained its forecast that 75,000 homes would be repossessed this year – which would be close to the highest level on record.
There was also a marked increase in the proportion of homeowners in arrears on their mortgages by more than three months – signalling that yet more people are set to lose their homes.
In the final quarter of 2008 there was a 31 per cent jump in the number of properties more than 3 months behind on mortgage payments. That left the proportion behind on payments at the end of the year at 1.88 per cent of outstanding mortgages, up from 1.08 per cent in 2007.
Homeowners severely behind on their mortgages, measured by the those more than 12 months behind on payments, jumped by 92 per cent over the year, the biggest increase since 1991.
The CML said that efforts by lenders, as well as various government programmes to assist homeowners struggling with their debts, were offering some relief.
“Despite the upward pressure on mortgage arrears and repossessions arising from the problems in the economy and rising unemployment, both lenders and government are continuing to find more ways to help more people stay in their homes,” the CML said.
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