The number of homes sold surged up by 4.5pc last month, helped by frozen interest rates and the "loosest mortgage lending conditions seen since the Lehman Brothers collapse" but Britain’s biggest building society warns that house prices remain 25pc more expensive than the historic norm.
First time buyers and buy-to-let landlords found it easier to obtain mortgages as loans for home purchases reached their highest number since December 2009 in November, according to the latest mortgage monitor from e.surv chartered surveyors.
Richard Sexton, director of e.surv, claimed the firm had completed more than 1m mortgage valuations over the last five years to compile its data. He said: “The market is thus far showing resilience in the face of the eurozone crisis. For the last few months, the banks have been focusing their lending on buy-to-let investors, but this is the first time they appear to have increased lending to first time buyers.
“This has resulted in the loosest mortgage lending conditions seen since the Lehman Brothers collapse. More first time buyers are rolling up their sleeves and piecing together the bigger deposits required to access high loan-to-value mortgages. No doubt they are sick of paying astronomically high rents.”
Estate agents LSL Property Services, owners of Your Move and Reeds Rains, claimed that sales surged by 4.5pc last month as frozen mortgage costs and house prices made property more affordable. Director David Newnes, said: “Static house prices don’t mean property values are standing still. Zero price growth means that in real terms property is becoming more affordable. With inflation running at 5pc, the real cost of property is getting smaller, which is good news for buyers.
“According to the Council of Mortgage Lenders, mortgage lending increased 9.8pc in the year to October and has risen for the last three consecutive months for the first time since the summer of 2007, which has contributed to the 4.5pc rise in transactions seen last month, as purchasing becomes a more affordable.”
Similarly, Paul Broadhead, of the Building Societies Association, said: “Mutual lenders saw the biggest increase in gross lending since January 2010 with £2.3 billion of mortgage lending last month, 20pc up on the same time last year. More than one in five mortgages is to a first time buyer.
“Lending responsibly has never been more important as the market remains challenging with household incomes ever more squeezed. Mutual lenders are actively trying to help consumers both by conventional means and through new options like the Government’s shared ownership and equity loan schemes.”
But Robert Gardner, chief economist at Nationwide Building Society, put seasonal good cheer in a sober long term perspective. He said: “House prices have remained surprisingly resilient over the past 12 months but housing still appears relatively expensive on a number of metrics. House prices are currently around five times average incomes, compared to the long-run average which is nearer four.”
So house prices remain 25pc higher than their long-term price/earnings average. That looks unsustainable until you consider the imbalance between supply and demand. Fewer than 108,000 new homes were built in England over the last year, while an estimated 240,000 new households were created.
As a result, if mortgage costs remain low and lending criteria continue to ease, house prices could remain expensive. But bears or pessimists should beware expecting a correction any time soon. To paraphrase John Maynard Keynes, the housing market might remain irrational for longer than sceptics can bear to remain in rented accommodation.
Tags: average incomes, Building Societies Association, building society, buy to let, buy-to-let landords, council of mortgage lenders, e.surv, equity loan schemes, eurozone crisis, first-time buyers, homes, house prices, housing,Interest rates, John Maynard Keynes, Lehman Brothers, lending, LSL Property Services, mortgage, mortgage lending, mortgages, Nationwide Building Society,price/earnings, Reeds Rains, rented accommodation, sales, shared ownership,Your Move
http://blogs.telegraph.co.uk/finance/ianmcowie/100013737/housing-sales-surge-but-house-prices-remain-%E2%80%9825pc-too-expensive%E2%80%99/
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