Halifax, Britain's biggest building society, will today announce little or no change in its larger index, supporting the argument of Kenneth Clarke, the Chancellor, for delaying an increase in base rates at his monthly meeting with Eddie George, the Governor of the Bank of England, this morning.
"The figures continue to reflect the flat housing market which we have seen since the spring of 1994,'' Philip Williamson, Nationwide's divisional director of business planning, said. "In spite of strong economic growth, confidence remains fragile. Falling unemployment has not eliminated continuing concerns over job security, whilst negative equity remains a constraining factor, particularly in the South.''
Both Nationwide and Halifax confirmed a continuing dearth of first-time buyers, frightened off by the prospect of flat prices and rising mortgage rates.
Halifax expects two or three half-point rises in base rates this year. While mortgage rates are unlikely to reflect the full impact, the building society predicts that the non-discounted variable mortgage rate will end the year between 9.and 9.5 per cent"The first-time buyer is holding back," a Nationwide spokesman said. "While affordability has never been better the perception of a house as an investment has changed. The house-price-to-income ratio is excellent but we do expect two to four rises in base rates during 1995."
On Monday the British Bankers' Association reported a 10 per cent slump in the number of mortgages approved for first-time buyers in the last three months of 1994. While some of the decline represented the loss of market share to building societies and other lenders in a fierce price war, the association expressed concern for the fragile recovery that the industry expects in 1995.
The association thinks high street banks have lost a significant share of the 55 per cent of the market they held in 1993. On Tuesday Cheltenham & Gloucester Building Society signalled further pressures on lenders' margins when it announced that it wouldkeep its base mortgage rates down by at least 0.25 per cent below the average equivalent of the top five lenders. However, lenders are still predicting a gentle recovery in 1995. Nationwide is forecasting a 5 per cent rise in turnover and house prices to increase by 2 to 3 per cent.