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Mortgage lenders gave little cause for cheer today as figures revealed gross lending dropped to £10.4bn in April, down 9% from the previous month. It also represented a huge 60% drop in total lending value from April 2008.
The Council of Mortgage Lenders (CML) were quick to put a brave face on the statistics saying that figures were affected by the Easter holiday, however, they conceded that both March and April lending had fallen by 57% compared with the same period last year.
Director general of the CML, Michael Coogan, insisted it’s still too soon to declare the housing market as fully recovered, despite suggestions from other commentators. Coogan described activity as “weak” saying: “Our forecast for gross lending of £145bn in 2009 remains unchanged.”
It isn’t all gloom and doom from the CML, who reported an rise in mortgage lending for March to £11.5bn – an improvement on £9.9bn for February. It also said 31,000 loans were approved in March compared with 24,000 in February.
The CML data reinforce the belief of many economists that the housing market has turned the corner and passed its low point. That said, the recovery will continue to be gradual with a few more stutters along the way given very poor economic conditions and tight credit criteria.
House prices look likely to fall further in most parts of the country but the rate of decline to appear to have steadied to something more progressively moderate. Economists expect house prices to fall by another 15% with hopes pinned on a mid-2010 bottom out.
While homeowners are understood to be anxious about falling values, the truth is for the market to recover prices need to drop well below 2007 prices. At their peak, house prices could not be sustained due to stagnant wage levels so a drop in values like we are witnessing is a bitter pill to swallow but a pill all the same.
Estate agents have reported increased interest from potential buyers since the beginning of the year and yesterday the chief economist at the Royal Institution of Chartered Surveyors said the market was “nearing stabilisation.” Simon Rubinsohn optimistically forecasted house prices to stabilise from around July of this year with the overall decline reaching 25%-30%.
All hopes depend on a relaxing of the credit restrictions impose by banks, which are still keeping many interested buyers out of the market. Mortgage lenders are insisting on large deposits or small deposits at high interest, which is especially difficult for first-time buyers.
Add to this the problem of unemployment and it is clear there are a few hurdles left to jump before we can say without any doubt that the housing market has fully recovered.
