David Prosser: Only the foundations of a housing recovery

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The Independent Online

Outlook Naturally, it is to be welcomed that Barratt, which is Britain's largest house builder by volume, is now expecting to be able to announce it returned to the black over the year to the end of June. A £40m profit is a good result by anyone's standards following a £33m loss in the previous year.

Let's not get carried away, however. For one thing, Barratt is more exposed than other house-builders to the London housing market, which is generally a law unto itself – while much of the capital is seeing strong demand for housing, the picture in the rest of the country is much less optimistic. In any case, sales volumes are far below what they once were – Barratt has had to take out capacity in order to recover.

Moreover, although the company says it is benefiting from a government scheme to help first-time buyers, this should not be seen as meaning that the constraints on mortgage lending have eased. And until they do, the housing market as a whole is not going to stage any kind of meaningful recovery.

Mortgage lenders, however, would have you believe they are increasing the supply of mortgages. There are now more than 12,500 mortgage products available, according to Mortgage Brain, which monitors the market, the highest number since April 2008. Another specialist, e.surv, says the number of loans-to-value at or above 85 per cent is now creeping up – to 9.4 per cent last month.

By historical standards, however, that remains low – the equivalent figure three years ago was around 20 per cent. Moreover, while there are more products on the market, including at higher loan-to-value levels, that does not mean credit is becoming more widely available – that depends on the terms of the deals on offer.

Given that first-time-buyer numbers are falling rather than rising, it would seem those terms are not becoming any less restrictive. And while government schemes will help, they are no substitute for a properly functioning private sector lending market.

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