There were just 39,900 loans for house purchase advanced in December – down 4% from November – the Council of Mortgage Lenders has confirmed.
However, the year-on-year drop was savage, down 37% from December 2009, although the 2009 figures were distorted by the number of people rushing to complete purchases ahead of a Stamp Duty holiday deadline.
First-time buyer numbers in December dropped by 3% to 14,500 and loans to people moving home fell 4% to 25,400.
Remortgage loans also dropped, down by 16% in December, to 23,400.
In the whole of last year, there were 529,300 house purchase loans, and 313,200 remortgages.
The number of purchase loans was slightly up on 2009’s overall figure of 511,700, and on 2008’s figure of 513,100.
The fall in remortgages has been marked: last year’s total of 313,200 compares with 865,800 in 2008.
However, the single most worrying statistic relates to first-time buyers. The figure of 14,500 first-time buyer loans in December 2010 is a 3% drop on the previous month – but a huge 42% drop on December 2009. Again, the rush to beat the Stamp Duty holiday was significant, but it shows how badly first-time buyers feel they need such incentives to get on the housing ladder.
Overall last year, there were 194,600 first-time buyer loans, a drop of 1% from 2009. By December last year, just 6% of first-time buyer loans were interest-only, compared with 30% pre-2007.
The number-crunching will no doubt be discussed at this week’s summit on first-time buyers, convened by housing minister Grant Shapps.
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Comments
@MikeWilson
You keep describing what you believe are the consequences of a house price correction (I disagree but no matter) but not the mechanism that'll stop price falls happening. Because it would be unpleasant to some (I would say a minority but again, no matter) doesn't mean it won't happen.
I agree that there are people with cash but they are a tiny minority and nowhere near numerous enough to sustain a rising market. I would have thought that somebody who can think of no better investment that a 4th house at this time is a bit clueless.
Anyway, time will tell. For the record I think that the threat of rising interest rates will be the catalyst that starts the next downward leg.
@JimJiminy
Another thing you said was:
"The difference with the most recent recession was that house prices started rising again before the recession came to end - which is quite solid evidence that the rises from 2009 were a counter-trend rally and that prices will now fall to below the 2009 bottom, where they should be. "
A 'counter trend rally'? I think you're labouring under the illusion that the housing market is some sort of stock market. It isn't anything like a stock market. House prices do not 'rally'. They may go up and down but it is in no sense a liquid market like a stock market.
Something else you underestimate is the amount of cash washing about the economy. A good number of house sales are funded by cash at the moment - and have been since interest rates went so low.
I know loads of NEW buy to letters who have bought a property rather than leave a few hundred k in the bank earning 2%. And this is not just baby boomers. A friend of my nephew who is in his mid 30s and who runs a successful design agency has just bought his 4th house. He can't think of anything else to do with his money that will give him - in the medium term - a good return on his money.
@JimJiminy
You said: "What is the mechanism that will stop it? You seem to be calling for eternal inflation in a particular asset class or else, with no supporting argument."
No, I'm not calling for eternal inflation. (Not sure where you got that idea.) My supporting argument is that there is so much money already lent into the housing market that a significant reduction in prices will cause vast numbers of people to move into negative equity. A percentage of these people will lose their jobs and their houses will be repossessed. Banks have to maintain capital ratios and, when the property against which their loans are secured goes down in value by 50%, repossessions will cause them to mark to market.
This will take the whole banking system down. This is not like the early 90s. Then the bust followed a short boom. This time round we've had a 13 year boom.
You said: "The economy will not go down. People will not stop going to work and employers will not stop employing people just because house prices are falling. The economy will benefit from lower prices."
The economy will go down. The economy WOULD have benefitted from lower prices - if prices had never gone up. As it is many hundreds of billions have been lent into the property market. It is, in a very real sense, too late.
Think about the effect NOW on the economy if house prices went down 50%. Never mind the negative equity, repossessions and bank failures - the property owning majority in this country would immediately lose a big chunk of their (imagined until they sell up) wealth. They will simply stop spending money. Then you'll really have problems. You won't need to worry about house prices - you'll need to board up your house and lay in some food.
@MikeWilson
"a 50% fall in house prices (or whatever you are expecting) - particularly in areas of the country where people actually want to live (because of employment and wages etc.) just isn't going to happen."
What is the mechanism that will stop it? You seem to be calling for eternal inflation in a particular asset class or else, with no supporting argument.
The economy will not go down. People will not stop going to work and employers will not stop employing people just because house prices are falling. The economy will benefit from lower prices.
@JimJiminy
I'm not saying low house prices are a bad thing - as you say - the average mortgagee would have more money to spend to create jobs in the economy etc.
What I am saying is that after a 13 year long housing boom which has sucked so much borrowed money into it that, if it goes down, the economy will go down with it - a 50% fall in house prices (or whatever you are expecting) - particularly in areas of the country where people actually want to live (because of employment and wages etc.) just isn't going to happen.
There is too much invested in the market now.
@MikeWilson
That is a complete distortion of any sort of logic and is not backed up by facts. What planet do you live on? Increases in repossessions and unempoyment cause house prices to fall. House price falls do not cause unemployment and repossessions. Not only that, but when prices fall to more sustainable levels then buyers have more disposable income to spend in the economy, creating jobs, etc.
House price falls are a lagging, lagging indicator. Unemployment usually peaks several months after the end of a recession and house prices normally stop falling several months after unemployment has peaked. The difference with the most recent recession was that house prices started rising again before the recession came to end - which is quite solid evidence that the rises from 2009 were a counter-trend rally and that prices will now fall to below the 2009 bottom, where they should be. This will be great news for the economy as well as first-time buyers.
Give it a couple more years and first-time-buyers will be happy enough.
@Imbreda
You said:
"The only good thing about this stagnating market (rather than one finding true market value quickly) is the fact that my pain (waiting for prices to be realistic before buying a family home to live in) is far outweighed by the pain that will be felt by greedy vendors and estate agents. Soak up the pain boys, there's plenty more to come - and my sizable deposit stays in my pocket until prices are realistic."
Are you a refugee from the house price crash web site? You certainly sound like one. Over on that site about 20 people post, day in, day out, year in, year out - 20 thousand posts some of them (they must be unemployed) - all saying the same thing - over and over and over again.
They say that everyone in this country is stupid. That property is massively overvalued and must crash back to normal affordability and that anyone who doesn't realise this is an idiot. They have been preaching this for about 8 years now and still their house price crash has not come to pass. Some of them even sold their houses and rented, waiting to pounce when the market went down.
They're still waiting and they will carry on waiting.
They have no real understanding of how the economy and housing market actually works and rely on looking at endless affordability charts.
They fail to realise that if there is a house price crash the economy will go down the pan and the banks will not be around to lend them the money to buy a cheap house.
As for 'greedy vendors' - why wouldn't a vendor try to get as much money as possible for their biggest investment.
And as for 'pain' - what pain? If you can't sell at the price you're asking - and you need to sell - you drop the price until you find a buyer. At the moment that means knocking a small percentage off. In desirable areas, it still means selling at full asking I am afraid.
And, as for the pain estate agents will feel, if you detest estate agents so much - just refuse to buy or sell through them. You won't have much choice but, hey, at least you won't be feeding the wild animals eh?
easy answer: Simples to write - IMPOSSIBLE to implement!
Suggest note to self - Must try harder next time...
pass it on you bankers and drop your prices you vendors........simples not rocket science
Don't forget to wipe up your Cheese Man.......
Hohoho how the stupid make themselves stand out
These debates are like groundhog day
Forced sales will continue to drag prices down, significantly
Indeed repossessed apartments in the north are 50% of what they were in 2007
The better houses in the best areas are about ten percent down
Good schooling and nice settings are worth paying for and if you have a deposit they can be hard to resist
HD,
Can't speak for Cashback, but in my upmarket are of West London, two offices have closed down since Christmas, so I guess not that well.
Cashback - I guessyou are looking for some kind of reaction otherwise you wouldn't have written such a pathetic post.
If you don't mind me asking, how badly do you think us estate agents are doing?
Calling all Estate Agents, as things are tough have you considered a new career? Here at Asdas we're still hiring, looking for people for general light duties, with a chance to move up to shelf stacker, clearly the simpler things at first with no expiry date such as loo rolls or perhaps a job pushing the trollies around the car park. You'll get a nice uniform and paid holidays.
I have a guy who bought a house of a developer in the summer for £400k and is now on the market at £525 and has two offers £500k and higher. Does this mean house prices are going up 50% per annum,? ....of course not. Individual Stats are meaningless.
You have to admit that these FTB's, HPC whatevers do have a point. Especially when you look at examples like Penny and Gavins. Maybe the vendor should put some twigs in a vase? If my company was doing the valuation that'd certainly add another £10k.
The only good thing about this stagnating market (rather than one finding true market value quickly) is the fact that my pain (waiting for prices to be realistic before buying a family home to live in) is far outweighed by the pain that will be felt by greedy vendors and estate agents. Soak up the pain boys, there's plenty more to come - and my sizable deposit stays in my pocket until prices are realistic.
Good spot Gavin
RE"Check this out: "
Property bee shows it was on sale for £220k originally in 2010. That's a big increase from the £120k 2009 purchase price. No wonder it isn't selling.
History date event
14 February 2011
* Price changed: from '£204,995' to '£199,995'
20 January 2011
* Status changed: from 'Available' to 'No Chain'
17 January 2011
* Status changed: from 'New Price' to 'Available'
26 November 2010
* Price changed: from '£209,995' to '£204,995'
* Status changed: from 'No Chain' to 'New Price'
13 November 2010
* Price changed: from '£214,995' to '£209,995'
* Status changed: from 'New Price' to 'No Chain'
22 October 2010
* Price changed: from '£219,995' to '£214,995'
* Status changed: from 'Viewing Advised' to 'New Price'
07 October 2010
* Initial entry found.
* Status changed: from 'Available' to 'Viewing Advised'
As disposable income continues to get tighter the first time buyer strike will continue to grow. They simply can't afford these inflated asking prices.
Till asking prices become reasonable first time buyers will continue to hold off especially with the threat of higher interest rates.
Check this out:
http://www.rightmove.co.uk/property-for-sale/property-28098757.html?premiumA=true
Bought April '09 for £120k, can be yours now for the special price of £199,995k.
Ha, ha, ha, ha, ha, no wonder nobody is buying.
@AoS
I think we're talking at cross purposes. I assumed you meant house price / earnings ratio, a more reliable indicator than price alone which is pretty meaningless.
Anyway, I'l have to check out this HPC site you mention. You are obviously a big fan and they seem to provide a wealth of information.
Have a nice day. Ta, ta.
Accordinging to your very own HPC site, the trend is now higher than current average prices - or at least it was in October 2010...not much has changed since then, although many have reported a great start to the year.
AoS
So if you're taking the general trend line to represent fair value, it follows that houses are even more massively over-priced now than they were under-priced in the 90's?
Hands up - you got me.
Striclty speaking, that's an opinion, I'll give you that.
However, I would expect a 10 year old to look at historic graphs and be able to read that the 90s prices were massively lower than the general trend. Now they're much closer to being in sync.
One last thing, Trev.
Your own fan site says that the current average house price IS substantially lower than ANY other period in 2007. Also, direct from your source, the average price is now below trend.
I'd say using "anecdotal" figures is not ideal.
@AoS
"Houses were ridiculously under-priced in the 90s"?
Trev,
I did no such thing.
I gave two examples...both correct.
If mortage restrictions are relaxed (Even slightly), approvals will increase and so will transactions.
If prices go down (as much as you hope), big companies and private individuals with the resources to back them up will swoop in and add new, cheap, BTL property to their portfolio.
Apart from the bit about 'my county' - the rest of my post has no opinion, just obvious 'what will happens' if the two examples I gave come to life.
@AceofSpades
Obviously my evidence is anecdotal but I often hear of the following scenario:
- See suitable property on Rightmove.
- Use photos, street map, local authority planning applications to determine address.
- Check previous sold prices.
- Asking price appears to be around 2007 plus a bit.
- Forget about it.
It would seem that your advice to FTB's is "don't worry about that, buy now because if prices fall you'll miss the boat". I like the way you rewrite history to back up your argument. Nice touch.
Hello Trev,
This is a question - where do your findings come from of "2007 prices + 10%" ?
It's certainly not the case in the my live environment for the whole county where I am based.
Do you realise that mortgage applications are still at a substantial level? As in, the moment that lending restrictions simply became more accessible, approvals will rise.
The current transaction levels are lower, but agents are still in business, many making a success of themselves. More importantly, houses are still selling at the current pricing levels. Yes, volumes are lower, just like most other industries.
Houses were ridiculously under-priced in the 90s - this was a break from the trend. There's no rule as to what prices should or shouldn't be.
If prices dropped to such a level, such as the HPC wish, FTB's would be bullied out of the market as 'the big boys' would swoop in.
How long before sellers (and a good number of EAs)realise that 2007 prices aren't coming back soon? There is very little chance of achieved prices increasing this Spring - will the penny drop then? There is a lot of pent-up supply out there from accidental landlords etc who are waiting for price levels that look less and less realistic by the day. Even if sellers decide to hold out longer, the fall in demand at the moment is far outstripping any fall in supply.
That figure of 196,400 FTBs is the most relevant of all. Seeing as each age cohort is about 1 million, seventy per cent of us end up as homeowners, and most people buy as couples, in a stable market we'd expect to see around 400,000 FTB purchases, but we are down to half that level.
So clearly you can fool half the people all of the time, and the other half have gone on a buyers' strike.
'By December last year, just 6% of first-time buyer loans were interest-only, compared with 30% pre-2007'
Excellent news; the Ponzi-train hits the buffers. The funny-money express has left the station; next stop 'true market value'.
As Trev says, FTBs are either electing to stay away from the poisoned chalice that is the Uk property market or are prevented from financial suicide thanks to the FSA.
In the meantime, we'll still see the distressed sellers (death, divorce & repos) coming on the market setting the bench-mark for the rest of the market.
James
The FTB's that I know have more brains than you give them credit for. They see that even when they buy, rising prices are no use to them. It simply means the next rung on the ladder is more expensive. I'm not sure why other vendors don't realise this too.
They are increasingly taking a long view and good on them. Since the market is going nowhere (and with rising unemployment, government cuts and rising interest rates, prices more likely to fall than rise) many FTB's with already healthy deposits plan to save/invest for several years more and avoid the ladder altogether. The intention being to buy one home suitable for a family and stay there. Why pay the costs associated with moving regularly?
Trev
I am not sure you are right I'm afraid
It is certain that things are awful for first time buyers wanting to buy. Lets remember though that they want to buy at the bottom of the market so that their house will go up in value
People already in the market take a more relative view of house prices, and do not want to capitulate on price to satisfy buyers who want to make money
Sellers only capitulate when they have to due to financial worry, divorce etc etc, and most do not have to
The market will come to a dead stop soon. I wonder when greedy vendors and EA's will realise that realistic valuations are a vital first step to achieving a sale. This 2007 + 10% nonsense will end in tears for them both. I know tons of FTB's with large deposits in the bank or in share dealing accounts, who want to buy a house but are put off even viewing because of crazy asking prices. They see their non-property investments doing well and have all the time in the world to wait until vendor greed and EA stupidity is replaced by fear. Which it inevitably will be.