But – and it’s a big but – things are not always as bad as the media would have us believe.
It’s true – mortgage lending is down dramatically from previous years, but there is evidence that we’re reaching the floor. The final quarter of 2008 has seen fairly steady lending levels, and while painfully low, residential property transactions are stabilising. The fundamentals of the UK housing market remain – we have a growing population and not enough homes. With virtually all new construction on hold, this dynamic will be exacerbated.
Overall, house prices are accepted to have fallen in the region of 20% in the past year. People who have been biding their time in rented accommodation for the last twelve months are coming to the end of their leases and will increasingly be tempted to buy. The question on everyone’s lips now is mortgage finance, specifically the increased supply of mortgage products and higher LTV lending.
The government’s credit guarantee scheme and the measures proposed by Sir James Crosby in his November report should come into effect in late Spring next year. The most recent indication is that the Treasury will reduce the cost of providing guarantees too. Combined with the latest base rate cuts this should ease lending costs. With many of the write offs in the financial sector in the past, lenders recapitalising their balance sheets and the government pushing for increased lending, we should see mortgage supply improve. Unfortunately there will be a time lag between the recent changes announced and their resultant impact on the market. More action will be also required to restore confidence and help rebuild our market.
While it’s inevitable that more bad economic and unemployment news will emerge, I think for our sector, there is some light at the end of the tunnel. In the meantime it is imperative that we do not miss opportunities to play our part in balanced reporting of facts in 2009.