At first glance, Figures out today from the Council of Mortgage Lenders on February lending look slightly encouraging as will the numbers out tomorrow from RiCS but since these most of the numbers are expressed as percentages, two sales in February would genuinely be a 100% increase on one hypothetical sale in January! There may be reasons for cautious optimism as there often is in Spring but any improvement is relative.
The Council of Mortgage Lenders figures confirm that over the last 12 months, lending for house purchases in February was down 47% and the value of remortgage loans down 25% on the month before and a whopping 60% on Feb 2008! What’s more relevant for house prices is that according to the CML first time buyers were having to find 25% deposits with an income multiple of just 2.95. Just two years ago in April 2007 when a little known bank called Northern Rock was lending one in every four mortgages their average loan-to-value was reported to be over 90%.
At that time, borrowers were having to find about £10k. Today, with average house prices a little over £150,000 borrowers are having to find closer to £38,000 out of taxed income. Many will take four to five years to save this meaning that most will be out of the market until after the 2012 Olympics.
Land Registry figures for February 2007 recorded over 86k sales in England and Wales. February 2008 saw 61,500. So far, just 8,900 sales were recorded in February this year. Whilst this figure is bound to rise before being formally confirmed in May, sales may not exceed 22,000. For those like estate agents and mortgage brokers who depend upon turnover, the market is like a Downing Street email – unbelievable!
Estate agents report increased activity over Easter. No great surprise that with the daffodils out, the main selling weekend of the year saw frustrated house buyers going into the few remaining agents offices hoping to find something they could actually afford. After all, it costs nothing to look. It remains to be seen whether these voyeurs will translate into sales. Unless they do, then whilst volumes of sales and mortgages can really only go one way, house prices can still fall.
Asking prices are already down over 10% year-on-year with sales often being agreed at about 15% below this. You may not have much sympathy for agents and lenders as they go bust but if prices continue to fall then the impact on everyone could still be severe!