House sales collapse underlined

Further signs of the housing market's collapse emerged yesterday after figures from the Inland Revenue revealed that fewer property transactions took place in April than almost any other month since records began 18 years ago.

The number of sales recorded last month by the Revenue stood at 85,000, beaten only by the figure of 72,000 reached in February 1993, when house prices stood almost at their lowest ebb.

Even on a seasonally-adjusted basis, the results are the lowest for any April since 1977.

The Building Societies Association, which represents most lenders, said yesterday:

"This is extremely serious. It may not be quite as gloomy as the early 1990s, when house prices were falling and interest rates were high, but this is one of the lowest points the markets have faced."

The BSA's comments were underpinned by April's estimated new commitments figures - the number of lending pledges building societies make to borrowers - also released yesterday.

They showed the societies made only 42,000 pledges, compared with 54,000 in the same period last year.

The number was also down on March this year, traditionally not as good a month for house buying.

In cash terms, new net committments slumped almost 33 per cent, down from pounds 3.66bn in March to pounds 2.88bn in April. These figures are considered important because they reflect likely real borrowing in months to come.

Adrian Coles, BSA director-general, said: "The continuing poor state of the market is exacerbated. General concern over rising interest rates and continued falls in house prices add to uncertainty."

He blamed increases in personal taxation and cuts in mortgage interest relief, together with fears over planned reductions in income support for mortgage interest from October.

Rob Thomas, an analyst at UBS, the Swiss banking group, halved his forecast for house price rises in 1995 from 6 to 3 per cent.

However, Gary Marsh, head of communications at Halifax Building Society, said: "That estimate is probably optimistic. We had already revised figures to that level, based on estimates of continued growth in transactions. I would now argue that even 2 to 3 per cent is too high."

Lenders reacted by pegging the cost of their fixed-interest loans. TSB said its 10-year fixed-mortgages would fall from 9.99 per cent to 8.89 per cent, a saving of more than pounds 500 a year on a pounds 50,000 mortgage. It is also cutting the cost of its 5-year fixed loans from 8.89 to 8.6 per cent.

Its move follows that of Halifax, which reduced the cost of its five- year fixed rate loans by 0.8 per cent earlier this week. FMS, a direct lender, is to offer an 8.1 per cent rate, fixed until January 2000.

Ian Sheperdson, an economist at HSBC Greenwell, said: "No wonder societies are worried and cutting the rates for fixed interest mortgages. These figures show that demand for housing finance has collapsed.

"Even the perennially optimistic estate agents lenders and surveyors will find it hard to pretend things are improving."

Your Money, page 19