Property recovery eases ahead of election

Mortgage lending up 12 per cent in a month but house prices slip back

There was mixed news for the UK housing market yesterday as official numbers pointed to a recovery in the mortgage market in February, while also showing that house prices had slipped.

The Council of Mortgage Lenders (CML) reported a 49 per cent year-on-year increase in the number of house purchase loans in February.

The 35,000 loans – worth £5bn – also marked a 12 per cent rise over January, although the CML pointed out that the numbers were flattered by an "extremely weak" start to the year. It pointed to the reintroduction of the £125,000 stamp-duty threshold in December and the severe weather as dragging on activity, and found it hard to identify clear trends in the market.

Bob Pannell, head of research at the CML, said the one-off factors had intensified what is already a traditionally quiet period for mortgage lending. "With the supply of credit still tight and the upcoming election causing political uncertainty, we are unlikely to see much change in the near future although the new stamp duty exemption for first-time buyers could boost the market somewhat," he said. The CML also hopes for the traditional seasonal pick-up as the weather gets warmer and the days get longer, he added.

The number of first-time buyers rose faster than the rest of the market, the survey found – 13 per cent higher than the previous month – after the end of stamp duty holiday had slowed demand.

Yet the news on house prices was less bullish as the latest statistics produced by the Communities and Local Government department showed a month-on-month decline of 0.1 per cent. The average price of £204,359 across the UK in February did mark a 7.4 per cent rise over the same month a year earlier, however.

Prices rose the highest in England, at 7.9 per cent, with Wales up 4.7 per cent and Scotland 4.2 per cent. Northern Ireland was the only region to fall, slumping on average 8.3 per cent in the year to February. The most expensive English region remains London at £321,289, while the lowest was in the North-east at £137,523.

This comes as Countrywide, the property services group, said its mortgage applications in March had grown to levels not seen in two years. The 20 per cent month-on-month growth in applications was the highest since February 2008. The group said it could be put down to a renewed confidence among customers.

Countrywide chief executive Grenville Turner said: "Widespread uncertainty surrounding the economy and election does not appear to have deterred mortgage customers, which might partly be due to the number people who have sat tight during the recession and are now ready to move regardless."