Housing Market May be Nearing Another Crisis
Recent data released indicates that the housing market in Britain is heading downward as mortgage lending in January was at its lowest level since the height of the financial crisis in the end of 2008. Despite a typical lowering of lending in the first month of the year the decrease was remarkable. The Council of Mortgage Lenders (CML) reported a drop of 26 per cent in lending for January when compared with December. The CML members are responsible for approximately 94 per cent of the home loan market which means their data is a fairly clear insight into the mortgage lending market.
The CML reported 28,500 new advances in January. This is 12 per cent below the level in January 2009. Halifax recently reported that house values had decreased in Britain by 0.9 per cent in February. Economists expect this trend to be seen in the months ahead as more data is released. Howard Archer, Chief UK Economist at IHS Global Insight said: "The very weak CML data indicates the housing market started 2011 on the back foot and supports our belief that house prices are headed down further over the coming months. We expect house prices to fall by around 5 per cent in 2011 and ultimately to decline by around 10 per cent from their peak 2010 levels." The Office of National Statistics reported that construction output fell by 13.9 per cent in the last quarter of 2010. When viewed in the context of lower lending levels, loss of output in construction, and a decline in house prices it appears the housing market is losing its grip on recovery. Real estate agents and some economists have called on lenders to do more to help those seeking lending. Peter Rollings, the Chief Executive of Marsh & Parsons said: "These numbers keep getting worse despite two years of record low interest rates. Nobody is calling for a return to the irresponsible lending of a few years ago, but the choke on mortgage finance is stifling buyers who want to take advantage of the value there is in much of the UK property market."