Show borrowers the money and they will buy

One of the questions I am most frequently asked is - when will we see the bottom of the housing market?

It’s the million dollar question. Call it right and you can make a financial killing. Call it wrong and you will be left kicking yourself for missing out.

And increasingly, it seems we will see the bottom of the market sooner rather than later.

Halifax rather surprisingly announced in its January survey that house prices rose by 1.9% after 11 successive months of decline.

While the lender said this was not the start of a recovery and that we should not get carried away, the numbers show there is increased activity in the market.

Reports from estate agents also indicate a significant level of activity, with increased viewings as consumers on the lookout for bargains realise that this is a good time to buy property.

Prospective purchasers have decent deposits and are not relying on high LTV mortgage deals, which is just as well as they don’t exist anymore.

Lenders are worried about liquidity and the capital implications of falling house prices in the current environment.

The only fly in the ointment is that some vendors remain adamant their properties have retained their value, contrary to the evidence of every house price index.

But this phenomenon is being noted less and less, with a narrowing gap between asking and selling prices as vendors and buyers become more realistic.

Estate agents also report that consumers who sold up and moved into rental accommodation are increasingly asking for six-month break clauses in their contracts so they can take advantage of the bottom of the market when it comes.

The lack of return on the pots of money accumulated from the sale of their previous properties is further focussing their minds, while the low mortgage rates now available are making having a mortgage more attractive than paying rent.

So with the housing market finding some equilibrium, it is time to turn attention to the mortgage sector.

It is apparent that we need to see some higher LTVs to encourage first-time buyers onto the housing ladder and kick-start the market.

We also need more detail on government proposals to help banks overcome their shortage of capital and return to this level of lending.

Competition in the sub-60% LTV space is all well and good but we need to see this at 95% LTV too.

Contrary to how things may seem at times, there is a desire to lend on the part of lenders but the capital requirements of Basle II are holding them back.

The alternatives are, as usual, short on detail although they need implementing urgently – ideally before the bottom of the market has been reached.