Housing hope as home loans triple to pounds 900m

NIC CICUTTI

Mounting signs of a housing revival will be given fresh impetus today with figures expected to show the amount pledged by building societies to borrowers last month tripled to more than pounds 900m.

The net lending total, which does not include remortgages, is likely to be close to the total of pounds 1.02bn for November 1994, reversing the downward trend for most of this year.

The growth in building society lending, up from a low point of pounds 295m in October and pounds 614m in September, is part of a set of statistics suggesting the market is gradually moving off the bottom of its recessionary dip.

Halifax and Nationwide building societies have both issued figures for several months in a row showing house prices creeping upwards. Gary Marsh, a manager at the Halifax, said yesterday that the revival was likely to continue.

"We are predicting that house prices will rise by about 2 per cent in 1996, moving up a further 5 per cent in 1997 and another 5 per cent the following year," Mr Marsh said.

"Some people will say that we have seen it all before. This time we have thought long and hard and we believe there are firm foundations for saying there will be a revival."

Mr Marsh said prices would be boosted by an end to the recent squeeze on incomes, caused by Government tax increases. Continuing drops in the unemployment rate will help fuel a return of the "feelgood factor".

The cost of mortgages is also more affordable today than it has been for years, increasing the potential for many existing borrowers to consider moving home.

Repayments on a pounds 50,000 interest-only loan were pounds 545 a month in March 1990. They have fallen steadily since then, to a new monthly low of pounds 284 from February next year.

Pent-up demand for homes will also help push prices up, according to the Council of Mortgage Lenders, the industry's trade body. The CML quoted a Bristol University study suggesting that home ownership could rose from 67 per cent of UK households to at least 70 per cent within 10 years.

Ian Shepherdson, UK economist at HSBC Greenwell, said he predicted a more robust growth in house prices next year, up to 4 per cent, 5 per cent in 1997, before tailing off to 3 per cent the following year.

"There will be a lift-off next year, but the problem will be the General Election. A Labour Government may push up interest rates in the immediate aftermath. Up to then, the present Government has a strong interest in promoting a strong housing market."

An additional factor promoting higher prices would be the expected pounds 10bn shares and cash "giveaway", as more building societies de-mutualise.

James Barty, chief UK economist at Deusche Morgan Grenfell said his estimates were for a 2.5 per cent rise in 1996, moving to between 4 and 5 per cent in each of the following years: "But the most likely upturn will be in housing turnover.''