In our housing market round-up, we look at the chances of an interest rate rise, the outlook for mortgages and the effect new crime figures will have on property sales.
Long spells of cold weather resulted in an economic slowdown at the end of 2010, and this lack of growth is being held responsible for a sluggish start to the year in the housing market.
The Royal Institution of Chartered Surveyors reports that the number of new properties on the market fell in January, with more members reporting a dip in demand for homes.
RICS spokesman Ian Perry says: “Uncertainty over the prospects for employment, alongside the shortage of mortgage finance, particularly for first-time buyers, continues to weigh heavily on transactions levels.”
But some parts of the country are struggling more than others, he adds.
“There is a very clear regional pattern emerging with London seeing a greater level of price resilience while in much of the North and Midlands, the market remains under greater pressure.”
RICS says surveyors are becoming more optimistic about the prospects for the rest of the year, however.
Figures from the Halifax suggest prices rose fractionally in January, up 0.8 per cent – but this reflected a fall of 2.4 per cent compared with a year earlier.
A number of analysts are suggesting that 2011’s property-market prospects are largely dependent on the health of the economy and whether it manages to bounce back strongly from last year’s contraction.
Outlook for rates
The Bank of England’s Monetary Policy Committee may have decided once again against raising interest rates from their record low of 0.5 per cent this month, but many analysts are expecting them to rise in the first half of 2011.
The average cost of fixed-rate mortgages – which normally reflect the likelihood of future rate changes – has been rising in recent weeks.
And as speculation about an interest rate rise continues, fixed deals could get more expensive still – so it could be worth snapping up a loan as soon as you can.
Mortgage broker London & Country is offering a mortgage fixed at 2.99 per cent until the end of May 2013. There’s an £899 fee, and it’s only available up to 65 per cent loan-to-value (LTV) – so the amount you borrow can’t be worth more than 65 per cent of your property’s market price.
Principality Building Society has a deal until March 2013 at 3.59 per cent – this has no fee, and it is available up to 75 per cent LTV.
If you want a longer loan, ING Direct has a three-year fix at 3.79 per cent up to 60 per cent LTV, with a £195 fee.
And Clydesdale is offering a five-year mortgage fixed at 4.29 per cent, up to 65 per cent LTV and with a £999 fee.
Could new crime stats hit house prices?
The recent publication of local crime statistics on the Police.uk website have raised fears that house prices could be hit. Property site Findaproperty says that the availability of detailed crime figures could have a similar effect to school catchment areas, with some areas seeing values rise substantially and others suffering.
But David Hollingworth at London & Country says: “I think the statistics will help people build a picture of the area but I don't expect they will have a big bearing on buying behaviour.
“Most people will have a good idea of what the profile of the area is likely to be – although those moving to a new area will find the info more interesting and this could prevent them making a grave error. Obviously it is useful that data can be easily accessed online, not only on crime but also local schools and other services.”
A new deal for trapped owners
Lloyds TSB has announced a new mortgage deal aimed at owners who want to make their second house purchase – the bank calls this group “second steppers” – but who are blocked by low or negative equity.
According to Lloyds, first-time buyers typically stay in their first home for four years. The bank points out that those who bought in 2007, at the top of the market, are now more likely to be in negative equity, where their mortgage exceeds their home’s value.
Under normal circumstances, the seller would have to have enough spare cash to cover their negative equity and put down a decent deposit on a new property.
But Lloyds’ solution is a range of mortgages which allow customers to move while remaining in negative equity.
The only time an extra deposit would be needed is if the new property cost more than the old one.
For example, if someone owned a home now worth £110,000 but had a mortgage of £130,000 outstanding, they would be allowed to move to a £120,000 property provided they could put down a further £10,000 as deposit.
Under normal circumstances, a bank would demand the borrower make up the full shortfall between the sale price (£110,000) and mortgage (£130,000).
Hollingworth says: “This means owners will not see their savings completely swallowed up in dealing with the negative equity.
“No additional borrowing is allowed, but it offers a new option to existing borrowers that could be invaluable where a move is a necessity, for example for job relocation. It could be preferable to trying to let the property while taking on another mortgage on the new home.”
