Recent house price stats show anything from another monthly fall to a slight rise, although interestingly the year-on-year stats mainly seem to show between a 15% – 20% fall. What does seem to be clear, therefore, is that the various sources predicting a 40% or even 50% drop are wide of the mark.
Now I am sure I will get pilloried for that comment on places like House Price Crash.com, but I just cannot see another 20% drop on top of this.
Sentiment is returning, buyer numbers are slowly increasing, enquiries are up, as reported this week by the RICS, and there are signs that lenders are starting to relax their criteria. Although the recovery process is likely to be painfully slow given the general state of the economy, things are starting to improve.
It is pleasing to see that there are more tentatively positive stories and quotes emerging in the press, and the latest to weigh in with their two-penneth worth is David Miles, the soon-to-be- new-boy on the MPC and Morgan Stanley’s’ Chief UK Economist., stating “The worst of the recession may well be behind us.”
This is all well and good, but that does not mean that it is time to crack open the champagne just yet.
Figures out today from the Council of Mortgage Lenders shows that there are now around 900,000 homes in negative equity. This is of course not good news, but should be put into perspective against 1.5 million in the same position in the early 1990’s and facing much higher interest rates.
The fact that interest rates are at their historic lows, however, should ensure less people are forced into repossession than otherwise may have been the case.
The main issue for many is the fact that they cannot remortgage, as lenders continue to offer rates only to those with decent levels of equity, and at ever-increasing margins. This is especially true of tracker rate products. 3% above Bank Base would have been laughed at not-so-long ago even on a complex commercial loan, now it is the norm.
This may seem like a nice, low rate now, but any quick increase in rates and this could turn into a nightmare for many.
It does seem that lenders have an opportunity to get what they have always wanted now, and that’s for many to move onto longer-term fixed rates. But I still feel that they are not taking advantage of this opportunity yet, and that there is room for more competitive fixes over 5 and 10 years.
In my book, a 5 or 10 year rate, certainly at 75% or even 85% in this market, to the right applicant, with prices surely set to recover over the long-term, is a no-risk loan. This is perhaps why I am not an underwriter!
Anyway, next week is budget week, and that should be jolly exciting.