Signs of life in mortgage world
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The worst of the housing recession seems to be behind us as business levels pick up and green shoots start to emerge, says Sally Laker, managing director of Mortgage Intelligence Holdings
As we get mixed messages about the state of the housing marketing the latest update from Rightmove is certain to have keen doom-mongers springing into action.
The website says it expects house prices to fall for the next three months as new sellers drop their asking prices by almost £4,000. Its house price index shows that average asking prices across the UK fell £3,744 in October - that’s 1.6% down on September’s level.
But to confuse matters, Rightmove also says seven out of 10 regions reported prices rising on an annual basis. It says the South-East saw the biggest rise in prices with an average hike of 3.8%, driven by the lowest average stock level per estate agent.
Meanwhile, according to Acadametrics the average value of residential property transactions completed in Eng- land and Wales in October was 0.7% higher than in September. This is the sixth month in a row that modest growth in the prices at which homes are sold has been seen. Prices are now just 2.4% lower than a year ago, according to the firm.
Are you any the wiser for all this housing market data? Me neither. For me, it’s about what I see in my business rather than contradictory surveys, all of which may be right based on their own criteria and methodology. I’ve seen an improvement in business levels during the autumn and while the festive period is traditionally quiet I’m optimistic about a continuing modest improvement in 2010.
I’m also confident that falls in house prices are behind us. We have passed the bottom of the market and are now seeing a slow rise.
While it’s clear that our economy has suffered more than most countries’ in the past couple of years and we are lagging in terms of recovery, green shoots are appearing at last.
It’s fair to say the government’s recent £25bn extension to its quantitative easing programme has not exactly set the economy on fire yet and it may never cause a fundamental shift, but every little helps.
I’m also heartened by the fact that gross buy-to-let lending grew in Q3 2009 for the first time in two years, according to the Council of Mortgage Lenders.
Gross buy-to-let lending reached £2.1bn in Q3, up 10% compared with the previous three months. The number of buy-to-let loans also rose from 21,600 in Q2 to 23,700 in Q3, although the trade body notes this modest recovery is from a low base. But again, every little helps.
Buy-to-let loans now represent 11% of all mortgages, with 1,205,000 outstanding loans worth £144.2bn. I expect to see this sector continue its recovery in 2010, given the overall shortage of housing stock and lack of first-time buyer mortgages at attractive LTVs.
I expect to see the buy-to-let market continue its recovery during 2010 - in fact, an improvement in the availability of these loans would go a long way towards supporting wider sustained growth
In fact, an improvement in the availability of buy-to-let loans would go a long way towards supporting sustained growth more widely.
Purchase lending in the buy-to-let sector has been much more dominant than remortgaging of late, echoing the mainstream mortgage market. The ability to remortgage buy-to-let deals has been hit by the lack of buy-to-let mortgages at more than 80% LTV. And the number of buy-to-let mortgages in arrears fell to 20,500 in Q3 compared with 22,900 in Q2 - another positive sign.
The CML has dramatically cut its forecast of the number of repossessions for 2009 to 48,000 from its initial prediction of 75,000.
Michael Coogan, director-general of the CML, says the organisation is glad to have been wrong in its previous forecast and I’m sure we all agree there.
It’s also encouraging that the securitisation market is starting to open up, with numerous banks and smaller building societies expected to bring securitisations to the market soon. Lloyds Banking Group completed a £4bn securitisation in September and Nationwide completed a £3.5bn one at the end of October.
As an optimist I like to talk the market up and look forward to better times but I’m also realistic. We are clearly in for some tough times but things will get better. The signs of improvement are already clear to see.
