Home loans, prices and sales all falling

Two new sets of figures show dips throughout the property market

New mortgage market research shows the Funding for Lending Scheme seems to have failed to improve lending to first time buyers. Indeed, purchase loans are 7 per cent lower than last year and lending to borrowers with small deposits has fallen away steeply over the last three months.

Meanwhile, a second set of figures indicates that house sales fell 24 per cent as prices dipped during September, partly as a result of the Olympic effect, with house prices down very slightly on a monthly basis and annual house price increases slowing to 2.2 per cent.

According to e.surv chartered surveyors, house purchase loans in September fell to 47,603, the third worst September since records began in 1993. The fall in loans was steepest among first-time buyers.

Richard Sexton, business development director of e.surv, said: “The mortgage market has been struggling since June and is considerably weaker than it was this time last year. The period between August 2011 and May this year marked a real upturn in lending. But that fillip planted false hope. Since then, the effects of the double dip recession have sapped the confidence lenders have in the economy. That, combined with a squeeze on the funding lenders get from the money markets, has dragged down lending.”

David Newnes, Director of LSL Property Services whose figures showed a drop in house transactions, said that the housing market was still feeling the effects of the distraction of the Olympics.

"The lack of lending, especially to first-timer buyers, is choking off first time buyer sales outside of prime London, while uncertainty over job prospects in many parts of the country is still affecting sentiment of many prospective buyers," he said.

“Much hangs on an improvement in the mortgage market. We’ve yet to see enough time elapse to feel a substantial impact from the Funding For Lending scheme in sales prices and numbers, or a boost to activity at the bottom end of the property market. However, lenders are confident that it will lead to increased funding for home buyers, and expect credit availability to increase significantly in the final quarter of the year. If this is the case and the cheaper finance reaches those waiting to purchase their first home, it could provide a welcome new impetus for transactional activity, and a new source of optimism for would-be buyers.”