Lenders must shape up to aid recovery

18 January 2010

The latest house price indices from Nationwide and Halifax seem to be encouraging but claims the market is seeing a sustained recovery may be premature.

The desire for good news is understandable and with the data telling us that prices rose by more than 5.5% in 2009 there are reasons to be a little more cheerful than at this time last year.

But 2010 will present challenges. Pre-election uncertainty is likely to mean a prolonged period of little activity as the Treasury, the Bank of England and lenders tread water. And limited supplies of money and property will remain barriers to significant recovery.

Funding conditions deter lending and restrict activity while the severe shortage of housing stock means fewer transactions.

First-time buyer prospects have improved based on a Halifax survey showing that for those on average earnings 39% of local authority districts are now affordable compared with just 6% at the start of 2007.

But obtaining a mortgage for these buyers is still difficult without a sizeable deposit.

To aid the recovery lenders must increase the competitiveness of their deals and boost LTVs. Improving mortgage availability and affordability
will give further support to home buyers.

While house prices have held up well in some areas due to the shortage of property, many other factors need to be addressed before the
market can make a meaningful recovery.

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