According to the Rightmove house price index the average asking price for a property increased by 0.6 per cent in July to £227,864, up from £226,436 in June.
The July increase more than cancels out the 0.4 per cent decline in June, which had followed rises in the previous four months. This means that asking prices are now 6.9 per cent higher than they were at the end of 2008.
Although the latest Bank of England Trends in Lending report shows very weak lending in May, there are predictions of a recovery in the next quarter from lenders. Official data for May showed the lowest flow of total net mortgage lending since the monthly series began in April 1993, but the major UK lenders reported that in June their flow of net mortgage lending rose a little.
The major UK lenders reported a further rise in approvals for house purchase in June, suggesting that mortgage lending for house purchase may continue to strengthen in coming months. Fixed mortgage rates rose in June, in part reflecting increases in swap rates. Some major UK lenders have reported that signs of stabilisation in housing market activity and prices, and the margins prevailing on higher loan-to-value products, have slightly increased their appetite to lend at higher LTVs.
Mortgage intermediaries performed 788,483 mortgage sources in June, a rise of 23 per cent from May, according to the July TrigoldCrystal product index. Furthermore, gross lending picked up by 17 per cent in June, rising from £10.5bn in May to £12.3bn in June according to the Council of Mortgage Lenders. More positive signs signifying that that the market could be slowly on the mend.
As always, lack of funding is the key stumbling block for a sustained recovery, but the BoE report and other surveys do identify some potential green shoots. And let’s face it, we need to tightly grasp and build upon any green shoots in this fragile market.
I was also interested to note that the average shelf life of mortgage products fell to just 14 days in June, as lenders scramble to increase rates in order to ensure products do not become too marketable. This is down from 23 days in May, say Moneyfacts. It is another sign of the fragile nature of the market and the underlying lack of funding.
The other major concern I have is that without a sub-prime market the mortgage sector will not fully recover. With the demise of many sub-prime lenders since the start of the credit crunch, the responsibility may rest with prime lenders to establish sub-prime operations, but I cannot see this happening in the short-term. Having said that, a gap in the market clearly exists and eventually an entrepreneurial lender will no doubt grasp the nettle, secure funding, and may even beat the more established prime players to the draw.
Once a lender takes the initiative my guess is that more will follow. I can understand the difficulties and concerns lenders face, especially with regard to sub-prime, but there is clearly a killing waiting to be made for the brave.
While there seems to be a delay with government financial support filtering down to the lenders, the fact still remains that some have funds to lend and need to do so to generate revenue. Therefore, it is only a matter of time, all be it precious time for those whose livelihoods depend on it, until the market kick-starts itself into action again.
Sally Laker is managing director of Mortgage Intelligence and Mortgage Next.