Housing market at a standstill

The housing market stalled during November with the number of mortgages advanced to people buying a home remaining unchanged, figures showed today.

Around 44,000 loans were lent to people buying a property during the month, unchanged from October and the joint lowest level since last May, the Council of Mortgage Lenders said.

The figure was also 15% down on the number of loans advanced in November 2009, when the market was distorted by people buying lower-value properties rushing to complete transactions before the stamp duty holiday ended.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "The CML data showing essentially stable but low mortgage approvals for house purchases in November reinforce our belief that house prices will not collapse but will trend down by some 10% from their 2010 peak levels through to the end of 2011, in the face of an unappetising mix of factors.

"Given that house prices have already fallen by some 3%, we believe that they will fall by around 7% in 2011."

He added that there were some signs that the number of properties coming on to the market was starting to dip, and this would provide some support for house prices, but much would depend on mortgage availability, and how well the economy and employment levels hold up in the face of spending cuts.

There was a 4% rise in the number of people remortgaging during November, with 26,000 loans advanced to people switching deals, although this was still 12% down on a year earlier.

The CML said figures from the Bank of England had shown a much bigger jump in remortgaging activity during the month, with 36,300 loans approved in November, up from 29,200 in October, suggesting activity in this part of the market will remain buoyant during the coming months.

There has been growing competition in the remortgage market recently, as lenders are keen to tempt borrowers off the standard variable rates that many are sitting on.

Anecdotal evidence also suggests homeowners are becoming increasingly inclined to move on to fixed rate mortgages due to fears that interest rates may rise sooner than previously expected.

The CML figures showed that just over half of all mortgages that were taken out during November were fixed rate deals.

The number of first-time buyers getting on to the property ladder rose slightly during November to 16,400, after falling sharply in October.

For the second month running people buying their first home put down an average deposit of 20%, compared with one of 24% in September, suggesting banks and building societies may have loosened their lending criteria slightly.

Michael Coogan, director general of the CML, said: "It is encouraging to see credit criteria becoming a little more liberal for first-time buyers.

"But the funding and capital constraints on lenders will continue to exert a dampening effect on lending, and criteria are unlikely to loosen substantially."