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Sally Laker: The housing market is still a long way from overheating

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Why is it that now the market is seeing strong signs of recovery, we are constantly reminded of how the bubble burst and led to one of the deepest recessions in living memory?

No sooner have we seen first time buyer activity increase and higher loan to value mortgage products return, than the doom-mongers are out in force, reminding us of the ghosts of the past. Yes, we must learn lessons from what went wrong but do not let that hold us back from a positive future.

A number of industry experts have said that UK house prices are going through the roof and are getting out of control. This is simply not true.

Data from Land Registry shows, that over the past 12 months three quarters of the UK saw house prices rise by less than 4 per cent. In fact, in three quarters of areas, house prices are still well below their 2007 peak, evidence that house prices are not overheating in most regions throughout England, Scotland and Wales.

The data also shows that average house prices outside of London and the South East of England are 93 per cent of what they were in 2007. However in London, there has been a significant increase in house price. Strong demand from homebuyers and a lack of stock is underpinning house price increases in the capital.

Research by Countrywide, reveals that in London, between February 2013 and February 2014, there was a 22 per cent drop in available housing stock coming to the market. Never have so many buyers been chasing so few properties.

The research also highlighted that for the vast majority of households, mortgage repayments on a property purchased with a 5 per cent deposit are unaffordable. In the North West of England the proportion of households able to afford a 95 per cent mortgage is 55 per cent, in Yorkshire and Humber and Scotland it is 50 per cent. In the South East and South West of England it is 20 per cent and in London just 5 per cent.

Despite the introduction of the Help to Buy scheme, the average first time buyer puts down a 20 per cent deposit, a figure that hasn’t changed for the past five years.

The Help to Buy Mortgage Guarantee scheme accounts for only one in 20 UK mortgages, 6.5 per cent of total mortgage lending by volume, and 85 per cent of lending goes to first time buyers. Countrywide has seen 100 per cent of guarantees on houses under £300,000, despite the £600,000 cap.

The Help to Buy Equity Loan scheme has supported a larger proportion of new build sales in lower value markets. Equity loans as a proportion of completions have been evenly spread throughout the country with 7 per cent of Equity loans going to homebuyers in London but it is the North East of England that tops the chart at 27 per cent.

Together, both parts of the Help to Buy scheme support fewer housing transactions where market recovery has been stronger. It has had greater impact in the North East of England, where one in 10 housing transactions have been supported by Help to Buy, compared to one in 50 in London.

There is quite a way to go before we are facing a meltdown in the housing market, despite the many industry experts reporting that we are already in it.

Sally Laker is managing director of Mortgage Intelligence Holdings

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