Evidence that the housing market has significantly slowed during 2007 came with the news that the number of new mortgage approvals for December has fallen, making it the seventh consecutive month that the number of new loans approved has reduced.
The Bank of England recently released figures showing that the number of new home buyer UK mortgages approved during the month slipped to 73,000. Indeed, when you compare mortgages approved in December to the November total it represents a reduction of 8,000.
The number of new remortgages approved rose slightly to 93,000, but buy-to-let, equity release and first time buyer approvals were down yet again. Mortgages granted for all purposes during December totalled 226,000, amounting to an advanced sum of £25.4billion - representing a significant reduction on the average figure of 262,000 during the previous six months of 2007.
These figures have caused concern as they are weaker than many financial services analysts predicted. In addition, all the major house price indices are showing falls in the value of properties sold and the Land Registry recorded a fall of 0.4% in house prices in England and Wales during December; all fuelling fears that the market is slowing much quicker than expected.
It’s definitely not good news for first time buyers and that gloom is amplified in a separate report issued by the Royal Institution of Chartered Surveyors (RICS). The report highlights that the cost of getting on the housing ladder has leapt a staggering 350% from its most accessible point 12 years ago.
The affordability issue has arisen due to a number of factors, primarily the reduction of the loan-to-value (LTV) ratios that first time buyers were being offered by lenders. But, other issues such as stamp duty and rising professional fees have also impacted on the situation. Senior economist at RICS David Stubbs believes that it is unlikely to improve in the short term for first time buyers, unless the MPC agrees to a rate cut.
Although it may be ever-worsening news for first-time buyers, Stubbs pointed out that existing homeowners are now finding it marginally easier to repay their mortgages for the first time since the start of 2006 due to wage increases and stable interest rates.
Rather worryingly, RICS also believe that as a result of higher mortgage costs up to 45,000 people will lose their homes in 2008, leading to grim times ahead for some.
