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Housing transactions at lowest on record, says CML

03 December 2010
Written by rosalind renshaw

Housing transactions have fallen to their lowest level since records began, the Council of Mortgage Lenders has said.

It also noted that the contraction in UK mortgage lending since 2007 has been the most severe on record.

It does not expect lending levels for house purchase to be higher than 520,000 loans – the same as 2008 and 2009. 

The figure is lower than in any other year since 1974.

In the decade before 2008, loans for house purchase averaged almost 1.2 million a year, so the fall has been in excess of 50%.

The fall in lending is even more dramatic when measured by value, rather than volume. In 2009, gross lending for house purchase totalled £70bn, 55% below the 2007 figure of £155bn.
 
Over the same period, net mortgage lending fell from £108bn to £12bn and a further decline is expected in 2010.

Not surprisingly, says the CML, housing transactions have fallen to their lowest level since current records began in 1978.

The 770,000 transactions recorded in England and Wales in 2009 compares with 1,430,000 in 2007 and a low in the last housing market downturn of 1,134,000, recorded in 1995.

The CML said: “Current levels of mortgage lending for house purchase are abnormally low, even for a recessionary period.

“Although we must allow for some decline in demand, the pattern we have seen in this downturn underlines the extent to which the current slump is different.

“It has been driven principally by a reduction in the availability of credit, while previous downturns in the early 1980s and early 1990s were essentially caused by a reduction in demand for credit in the face of economic uncertainty and high interest rates.”

Meanwhile, lending levels dipped slightly in October, Bank of England figures have confirmed.

The number of loans for house purchase stood at 47,185, slightly down on the September figure of 47,369 and lower than the monthly average for the previous six months of 48,503.

Comments

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    Ray...With such a low deposit this comment is only aimed at FTB's? How many FTB's do you know that can jump straight into a 3 bed semi? The quicker they can realise their aiming to high the better.

    • 05 December 2010 12:51 PM
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    banks are caught between a rock and hard place. on one hand everyones telling them to lend money to keep housing market and small businesses afloat but on the other behind closed doors they under massive pressure to repay the governments who bailed them out and build up cash to withstand credit crunch 2. The reality is that crdit crunch 2 (The Black Hole) is inevitable and will cause huge damage and take entire economies down with it, the British people are in for some serious financial pain when the stuff finally hits the fan

    • 04 December 2010 14:59 PM
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    Simple.
    Read my post again.
    They do not earn enough to buy - so rent until they do. They have no god given right to buy.

    • 04 December 2010 10:01 AM
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    My goodness Mike, where do you live Hong Kong

    you could get a large executive detached round here for that

    sold a three storey terrace this last month at £32k

    • 04 December 2010 08:27 AM
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    There is one very simple reason why house prices cannot fall too much. At the moment there are few forced sales. If interest rates rise and there are mass repossessions banks will have to re-value the assets backing their loans and will need bailing out again.

    The government has not got the money to do this - at least not without more money printing and, if they do that, inflation will be unleased and the debts will be inflated away.

    One thing that cannot happen is a major correction to house prices (despite them being seriously over-valued) because, if it happens, the banking system will go down with it.

    • 04 December 2010 00:29 AM
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    What are you talking about? A 3 bed semi where I live is about £275k. Average wage is 25k. Errr 3 times 25k is 75k + 10% deposit - rough numbers a 3 bed semi should be 85k. So, currently, houses are over valued by 3 times.

    Or should someone on average wages only be able to afford a studio flat?

    • 04 December 2010 00:21 AM
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    This is worth repeating, just in case some did not 'get it' first time.

    Prices are now,on average, just about right.
    It is the greedy 'money lenders' who are wrong.
    If they accepted 10% deposits from credit & income checked purchasers and lent at a reasonable percentage on 3 times income most of the housing problems would cease to exist?

    • 03 December 2010 20:40 PM
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    Right,

    First off I see old Property Match is back doing his usual impression of a Glaswegian drunk, stumbling around repeating him self over and over while everyone walks swiftly by, ignoring him, but no matter, let’s not give him a quid, he'll spend it on Tennents Super and get more rat arsed so lets move on

    So, Evil_agent – fair point on Howard Archer and that Vicky wotsit, but like all the commentators I don’t believe a single one of their predictions has come true. Archer has had a lot of space in The Times for years, I think Murdoch’s hacks have got him on speed dial and whilst he gets headlines he, like Henry Pryor etc still haven’t called it right ever.

    Now there is a chap that has got it right several times and made judgements based on his predictions and he has always called it right, and for age’s as well, in advance of anyone else – Tony Pidgley Chairman at Berkeley Group, Google him if you know nothing of him he’s got some interesting news today.

    Anyway, there you go, lots of Economists, Journalists, HPC Communists, Pundits etc who get paid the same (okay not the HPC lot) whatever happens always get it wrong and one ex brickie multi millionaire who is responsible for thousands of jobs and would loose or make himself and his shareholders money on the back of his predictions being right…………………..every time

    I know who id listen too

    Jonnie

    • 03 December 2010 17:38 PM
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    Don't be silly!
    I have been in the business for over 35 years - through thick & thin (and major changes)

    • 03 December 2010 17:10 PM
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    Thanks James - Absolutely Agree! Web estimations are based on data input by seller - or prospective vendor; the real value or estimation is when an agent / valuer goes to the house and looks at details and makes actual valuation - thats what a real buyer will be looking at and not home value based on TemptMe! from ZOOPLA or an Estate Agent.

    Moreover your have nethouseprices.com etc to see how much they sold for and when - based on that - anyone who has ability to put 25% deposit will know what they are buying and no matter how good a sales man an estate agent is - he will be at a dead end with the genuine buyer unless he confesses the actual sale price!

    Anyways - I really think Estate Agents are deep down cornered unless they revive the property owners and buyers with some positive attitude and strategies.

    By the way "According to chief economist at HIS Global Insight, Howard Archer, the Bank of England data shows housing market activity firmly marooned in the doldrums, with the resulting downward pressure on house prices. He believes prices will decrease by around another 10 per cent by the end of next year.

    Capital Economics’ senior economist Vicky Redwood says the household borrowing figures provide more evidence of problems in the housing market. With activity this weak, it seems the house price falls have further to go."

    • 03 December 2010 16:00 PM
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    I am off for a pint now - in fact make it a half - the snow has buggered any chance of selling houses before Xmas :-)

    This doom story will be repeated now doubt at the start of January....

    • 03 December 2010 15:50 PM
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    Evil Agent - not all estate agents are immoral

    not all banks/bankers are

    People use agents because they want someone to stand between them and the buyer, however, the whole premise of pitching for the work based on who can quote the highest asking price is slowly being eroded because of so much valuation info on the web.

    Sellers are often greedy and naive and search around for the highest valuation rather than the best service - then they complain and wonder why they do not sell

    Is a weird industry - it used to be a profession of course

    • 03 December 2010 15:45 PM
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    Jo & Gavin

    I don't disagree with the sentiment, but clearly there is more than one argument here

    House prices will come down as transaction levels keep falling

    Interestingly though as sellers realise they won't get anywhere near what they "want" they will not put houses on sale - therefore helping to balance supply and demand......as in 2009

    Now, if interest go up a lot then we are all up the creek, because there will be tens of thousands of forced sales and house prices will tumble (do you think the BOE is not aware of this), confidence in all businesses will fall, unemployment will sore, the burden on the state will increase and we will slide into an even bigger depression

    Houses will then be bought by cash buyers, not first time buyers because they won't have the 25% deposits, nor will they be able to compete with the security a cash buyer brings to a transaction - repo's always go to cash buyers before ftb's.

    The whole thing is on a knife edge.

    Solution - wait a generation for people to secure an inheritance, then they will have a deposit - in the meantime half the country will be living in the wrong type of house for them.

    • 03 December 2010 15:38 PM
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    James - point noted - however I said "Bankers" and not Banks!

    And there are plenty of bankers trying to topple one another - I will take you to Frith Street whenever you like and introduce a couple of them - surely they can pay for lunch. Just like you can pay for my coffee if I visit your Estate Agency.

    Finally - moral view about home-ownership, hain? Estate Agents control over 70% of property on market for sale or rent - Billions of pounds in making "exchange hands" alone! Where did I see the morality or business ethics that the country could be proud of? Every Vendor or Buyer is full of complaints about estate agents - as far as the banks and bankers are concerned - the country can NOT live without them.

    Estate Agency sector is too far from that level of appreciation and every agent is just too eager to hammer the last nail in the coffin.

    • 03 December 2010 15:31 PM
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    Looks like Gavin is the only person on here witha sense of reality. The rest of you who believe house prices are "about right" really should go get their heads tested, house prices are hugely out of step with regards to price, 6 or 7 times the average salary, come on that's bloody shameful!!

    • 03 December 2010 15:26 PM
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    RE James "it's the deposit that's the problem"

    I disagree, deposits are high to protect lenders from the price falls. Its overvalued property prices that are the problem at the moment. Transactions will increase when prices come down.

    • 03 December 2010 15:13 PM
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    Evil Agent

    Just one observation about your post

    Banks are a fundamental part of society in this country - there are not enough of them for any sensible level of competition, and they have always traded on a moral standing.

    One could argue that they should take a moral view as it is their action or lack of it that controls the wealth and destiny of homeowners across the land.

    If it was an open market and buyers could get mortgages from across the globe I am sure they would right now.

    • 03 December 2010 15:12 PM
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    If you walked into a shop and a Mars Bar was £2.50, you would not buy it.

    If you went to buy a Ford Focus from a dealer and it was £35,000, you would not buy it.

    Houses are STILL selling, just not as many as recent years have seen, due to various factors. If houses were truly as over-priced as many love to exaggerate, NONE would sell at all - well at least nowhere near the volumes we are seeing now.

    Part of the problem lies with the inability to get a mortgage and this stupid philosophy of a property being an investment – it’s not, it’s a home. I see many FTBs who expect to be able to purchase a property which is well above what they can realistically afford.

    We have too many suckers for the media in this country – they read it, actually think the cock and bull story is factual (not just a get rich quick article) then thinks the World owes them something.

    30% (or even 50%) price reduction to property? It’s the same as trying to foce Mars Bars to be reduced to 10p and a new Ford Focus reduced to £7,000 – nobody would sell for that price, so there would be NOTHING LEFT TO BUY!

    • 03 December 2010 15:00 PM
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    You are talking as though the lenders / bankers need to think of Estate Agents before they think of their profit percentile or bonuses! Where as you are complaining because due to the less demand, lower property value and hard to sell portfolio - you will be losing out on your own commissions?

    Hmmm heard of Mirror?

    Anyways - When the going gets tough - Estate Agents should roll their sleeves and show buyers and vendors what they are worth! Not bicker around inderictly about their possible loss of commission.

    • 03 December 2010 14:58 PM
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    Prices are now,on average, just about right.
    It is the greedy 'money lenders' who are wrong.
    If they accepted 10% deposits from credit & income checked purchasers and lent at a reasonable percentage on 3 times income most of the housing problems would cease to exist?

    • 03 December 2010 14:27 PM
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    Property Match,
    Please do not include me in your
    'Its time the whole way we market and sell houses is changed.'
    I assume you would like the way 'we' market property to change to a much cheaper, low budget version of what 'we' do now only with lower asking prices, thus making houses easier to sell with less effort?

    • 03 December 2010 13:30 PM
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    A very narrow view PM

    If FTB's could get 95% mortgages tomorrow your theory would not hold water.

    They want to buy, they do not want to pay other people's mortgages in rent, and they can buy modest houses in most parts of the country for less then £100,000, therefore satisfying most income multiple criteria.

    The banks are the key and are systematically dismantling the housing market.

    They are making more money than ever by loading mortgages and other loans at 5/6% above base, and have little risk on new loans - they have no reason and are under no pressure to lend at 95%, and until they the market will lock out FTB's.

    House prices will not ultimately help young people with student loans and rents to pay - it's the deposit that's the problem - and certainly not the desire.......

    • 03 December 2010 13:16 PM
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    Its time the whole way we 'market and sell' houses is changed.

    The problems in the housing market are not owing to a lack of availability of credit but are price-led.

    The market will only flow again when the over-pricing of property being place up for sale, is stopped.

    • 03 December 2010 09:01 AM
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