Gross mortgage lending in July dropped to an estimated £12.6bn, and housing transactions also fell.
According to the Council of Mortgage Lenders, the total was 1% lower than June’s £12.68bn and a 6% fall from £13.3bn in July 2010.
Meanwhile, the National Association of Estate Agents said its members reported a drop in house sales from nine to seven per branch.
The CML said house prices were flat and activity levels disappointing. House sales of 204,000 in the second quarter of the year were the weakest for two years, with mortgage lending reflecting the trend: lending for house purchase is trailing below last year’s levels, while remortgaging levels are trending above.
The CML also noted a strong pick-up in buy-to-let lending, although much of the increase is in remortgaging, with lending to landlords for property purchase very subdued compared with a few years ago.
CML chief economist Bob Pannell said: “UK economic prospects have deteriorated as a result of weaknesses in some of the major economies and renewed stresses in the eurozone area associated with the sustainability of government finances.
“As a result, UK interest rates look like staying lower for longer.
“Housing market conditions remain subdued, but pretty stable. Seasonal factors continue to provide some support, but underlying house purchase activity may drift lower over the coming months.”
Richard Sexton, director of e.surv chartered surveyors, a firm which carries out a lot of valuation work, said: “July’s subdued figures confirm that June was just a fleeting uptick. The banks are handcuffed by weak economic growth and concerns over their capital liquidity.
“They have pushed out well-publicised high LTV products over the summer, but appearances can be deceptive. In practice, lenders are being forced to target low LTV borrowers: less than 10% of approvals in July were for those needing high LTVs.
“There is a discernible gulf between interest rates on low LTV deals, which are tantalisingly cheap, and the more restrictive rates on deals at 90% LTV and above.
“As a result, great swathes of lower income buyers are marooned in the rental market, while the lowest rung of the property ladder hovers just out of their reach.”
Comments
rant - I am not saying that you DID suggest house prices should halve.
You asked a 'what if...? based upon prices dropping by 50%.
You previously stated "Purely on a mathematical basis, sharing the lending pool around the mythical 'normal market' number of transactions would require price drops of a far greater scale than Great Britain has seen so far."
Now - some time ago I seem to remember (please correct me if I am wrong...) you stating that you only expected to see drops in the region of 20%. That was the theoretical example that CoTW gave.
Mate - mathematics doesn't come into play here. It is down to the wants and needs of the sellers. If they NEED to sell at a certain figure, but DON'T NEED to sell - then they simply will stay put until the figures stack.
You might consider this false economy - but needs are needs - and no-one HAS to sell at £x if they don't want to...
If transactions stay at present levels, then Agents need to adapt to survive. Lower numbers MUST be balanced by higher fees charged per unit.
However, they all seem to think I am mad for suggesting it... ;o)
I don't think my post was suggesting that I believe they will? I was trying to point out that claims that they will fall that much are not as outlandish as some might think.
With interest rates this low and significant amounts of govt support being given to those struggling to pay their mortgage, house prices are trending down. Meanwhile, there's no end in sight to the economic woes (things could well get worse before they get better). Who knows where the bottom is?
rant: But you have previously maintained that you do not expect prices to halve...
In a market that is and will continue to stagnate the only way this is going is less Estate Agents Im afraid.
I had a similar 'exchange' with CTW a while back. Purely on a mathematical basis, sharing the lending pool around the mythical 'normal market' number of transactions would require price drops of a far greater scale than Great Britain has seen so far.
Those in Northern Ireland and the States are however familiar with drops on such a scale. Even in densely populated Japan, prices fell up to 90% in some places after their bubble burst, and in nominal terms are still lower today than 20 years ago.
It's been said many times before, but it's worth trotting out again in case anyone has forgotten or didn't notice - house prices in this country TRIPLED in a 12 year period. If -- IF -- today's house prices halved, they would be about the same as they were ten years ago, when the country wasn't in the longest economic slump most people alive have experienced.
Rant: In response to your post aimed at CoTW, you say "Or prices fall to a level whereby the bank's limited lending can be spread around more buyers. Transactions then increase - you've yet to acknowledge this point..."
Surely this is incorrect - as CoTW stated two posts previous to yours "Take 20% off the price and banks will be able to ration the same funds among 42,000 mortgages instead of 35,000 a month."
As he says, however, this will barely scratch the surface of the shortfall in numbers from what is now described as a 'normal' market. But, as there is no such thing as a normal market, I pay little or no heed to these statistics.
Using your logic, is it a case then of "pick a figure for annual transactions, then adjust the prices to suit"?
CTW - Or prices fall to a level whereby the bank's limited lending can be spread around more buyers. Transactions then increase - you've yet to acknowledge this point although it is made in response to many of your comments.
I agree with you that there is currently no spark to make many vendors accept lower prices. However, the idea that lower prices will lead to more transactions is hardly breaking new ground.
When new willing entrants to a Ponzi scheme cannot be found, it is generally not a great idea to try and find more ideas to add another layer to the pyramid. That's merely kicking the can further down the road and storing up even greater problems for the future.
Those at the top of the pyramid, who have in paper terms gained the most and therefore have more to lose, are of course unlikely to accept this though...
Of course the industry will survive but it'll just be a lot leaner. That's the point of recessions.
Maybe we could a reality TV show? EA Death Match?
I could produce it.
@Ric
Exactly right.
Take 20% off the price and a 10% deposit becomes a 12.5% deposit. Meaningless, when banks are asking for 25% deposits from FTB-s to get a half decent rate.
Take 20% off the price and banks will be able to ration the same funds among 42,000 mortgages instead of 35,000 a month. Equally meaningless to an industry that needs 120,000 mortgages a month to survive in it's current form and meet the housing needs of a rapidly growing population.
The only solution to this crisis is a massive increase in lending.
Nothing else will help our industry survive.
It looks as if the market WILL just stagnate and only improve signifcantly when the general economy improves. When that will be is anyones guess!
Until then those who do not HAVE to sell and that is the majority, will sit tight until prices improve. Why should they sell at what they see as a 'loss' just to improve EA's turnover? ;0) So stagnate is the word.
Hi Broke(r)
I certainly agree that it is a mixture of the two.(prices and mortgage availability)
Lenders forcing the hand almost of the market to come down, their obvious way of reducing risk.
But frustratingly from the "sellers" point of view, you drop and you drop and you drop your price...and it does not actually seem to do that much in many areas it seems, the reports of prices being slashed everywhere are not followed by more property selling yet it is always shadowed by the headline, mortgage lending down.....instead I just see more cash rich buyers getting to the low priced stuff before the FTB's do!
Either way things will sort themselves out, be it 1 year or 10 years....prices will find there level and lending will become easier and yes I suspect it will be and clearly is prices which will have to give way first....that said....that is how the cycle works!
@Ric
I guess it depends where you want to lay the blame.
If people can't get finance for current asking prices, is that the fault of an unrealistic price or a lack of finance?
Personally I don't think it really matters. It is what it is. More finance isn't suddenly going to appear so prices will have to come down to meet what is available or things will stagnate further.
Broke(r) back
Nope don't agree....I am completely convinced most buyers are NOT as concerned about the actual asking prices as some would like to think, if this were the MAIN reason for the current slump then quite simply low offers would be flying around at large numbers from buyers and sales eventually being agreed and then correct pricing levels being found as a result.
The problem is simply the lending and the criteria.
As with any property market, you like a house and you dont agree with the price, you offer the vendor accepts or declines.....but without the vehicle to purchase then people just dont bother offering and this is for me the issue, not the current prices, otherwise if you think the £200k house should be £150k you would offer £150k! Perhaps it would be interesting to know what the level of offers across the country is like a truer reflection of the intention to buy! still low I would assume, possibly proving my point, it does not matter what you think they should be worth I cant get a mortgage.
As some have said before, take 20% off the market tonight and the buyers still have to find a large deposit and be "squeaky" clean to get accepted.
I again am not saying I want high prices as some seem to think a comment debating against high prices being the problem is a person wanting high prices, I just think the idea that it is prices holding buyers back is wrong....look at the heading of this thread......
@Raymondo
You miss my point. What I mean is that there is currently little demand for property at current prices.
@Broke(r) back mountain.
Marketing Valuations and Mortgages do not automatically relate. The lenders make up their own minds.
Is it any wonder when property "valuations" are so unrealistic? Hell, even George Osborne was saying as much last week.