Mortgage | Property Investment | Finance Guide

Prices edged up in the Midtown, City and Docklands housing markets in the second half of 2009, with an average rate of growth of 3%. Transaction levels remained relatively low, however, and the upward tick in prices had as much to do with the lack of stock for sale as any demand side factors. Given the absence of mortgage finance on reasonable terms, if there had been a bigger supply of property for sale it is possible that there would have been no increase in sales prices in 2009.

Taking a chronological view, July was the tail end of the unexpected boost to the market from equity-rich buyers that had started in March 2009. August is the summer holiday season and is traditionally quiet, but the normal September boost to sales transactions did not occur, although there was evidence of purchasers from the euro-zone buying apartments for family members at London universities. This led into a typically quieter 4th Quarter, with low levels of transactions and no further evidence of price increases. The impact of the interplay of supply and demand factors led to 6% increase in sales prices across Midtown, Bloomsbury property price and Docklands in 2009. The price of the illustrated average one-bedroom flat increased by £20,000 during
2009 from £318,000 to £338,000.

In a continuation of the trend in the first half of 2009, it remained the case in the second half that 70% of all transactions in our Midtown, City and Docklands offices were from 100% cash buyers. It was notable that there were fewer overseas buyers in the market in the second half of 2009, in spite of continued weakness of the pound against other currencies, especially the euro. The absence of mortgage finance from British banks available at reasonable terms is hugely influential to the sales markert.

There are currently 101 different mortgages available to people looking to borrow 90pc of their home’s value, down from 122 at the beginning of the year and 903 in July 2007, before the credit crunch struck.

But the number of home loans aimed at people with a 40pc deposit has soared during the same period, rising from just 17 in July 2007 to 251 in January this year and 320 now.

Financial information group moneyfacts.co.uk said the fall in availability of mortgages with a 90pc loan to value ratio (LTV) showed that first-time buyers were continuing to be ignored by lenders as they cherry-picked lower-risk customers.

Banks and building societies are also failing to pass on falls in their own funding costs to people borrowing a high proportion of their home’s value.

The cost of the average two-year fixed-rate mortgage for someone with a 10pc deposit has fallen by only 0.12 of a percentage point to 6.12pc since September 2007, despite the Bank of England base rate dropping from 5.75pc to a record low of just 0.5pc during the same period.

The margins that lenders charge on these products have also soared during the same period, from just 0.02 of a percentage point above two-year swap rates, on which the deals are partially based, in September 2007 to 1.34 percentage points a year ago, and a massive 4.25 percentage points now.

From -  http://www.telegraph.co.uk/financ

According to lenders’ group, activity in housing market remains at a very low level although there has been a slight increase in the number of mortgages sold in UK in the month of February. The Council of Mortgage Lenders (CML) said the number of house purchases rose to 24,300, (up by 4%) compared with January.

CML Director General Michael Coogan says, they are not convinced that underlying trends have shifted sufficiently to change their forecasts for mortgage market activity in 2009, but there are some positive signs for later in the year. According to him, some large banks are making more and more loans available through enhanced lending commitments, which is helpful, but will not satisfy consumer borrowing demand on its own.

The number of completed home loans for house buyers has risen slightly on a monthly basis, running at about one-third of the average of February’s total, ie., 76,000 loans for house purchase between 2002 and 2007. Accordingly, the total value of the completed home loans has remained unchanged at £3.1bn, which remains in stark contrast with the recent years.