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Pre-Budget reports look gloomy for the housing market

Tuesday, 21 April 2009 5:12 PM

Pre-Budget forecasts for the housing and mortgage markets are pessimistic.

The Association of Mortgage Intermediaries (AMI) predicts house prices will continue to fall over the year, with the lack of available mortgages - particularly for first-time buyers - holding back any "green shoots" now being seen.

Robert Sinclair, AMI director, said: "There are some positive indicators, which will conflict with other negative news. This may indicate we are now reaching the bottom of the market. For example, buyer interest is on the increase.

"However, mortgage availability remains the key constraint on the market and we fear we are not over the worst."

He explained those with good deposits or plenty of equity can access very competitive rates, but those who can't are unable to take advantage of lower house prices.

"Prices have fallen so much they are offering first-time buyers a terrific opportunity to get on the housing ladder - if they can raise the money."

The Bank of England today also issued its first Trends in Lending report.

It finds demand for mortgages is set to remain weak in the coming months as buyers anticipate further house price falls - but UK lenders are seeing only limited changes in their overall mortgage supply since the start of the year.

While some lenders are looking to increase mortgage lending, the Bank does note "markedly reduced" high loan-to-value lending.

The Council of Mortgage Lenders (CML) has also issued its prognosis, noting a "modest pick-up in housing market activity recently", but warning the market is still at an extremely low level.

CML director general Michael Coogan said: "The [Bank] report says some increase is expected in mortgage availability, but the volume of lending - and demand from consumers - will remain weak in the coming months.

"It chimes with our own briefing for members earlier this month, which we headlined Green shoots, no roots!"

He added any recovery in market activity is at a delicate stage, but would be enhanced by measures in the Budget to enable more lenders to provide more lending.

The CML is calling for an expansion in the availability of income support for mortgage interest (ISMI) and mortgage rescue support, along with an increase in the stamp duty threshold to £250,000 and a removal of higher rates of stamp duty.

The AMI is calling for further injection of funds into the mortgage market with an expansion of the Special Liquidity Scheme and either an extension of the stamp duty holiday or an abolition of the tax.

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