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UK pays off £8bn of its mortgage debt over the final quarter of 2008. This is a very important part of the correction in the housing market as people begin to pay down their debt, and we expect it to continue contributing to the downward trend in the market - more money diverted to paying off the mortgage means less spending in the rest of the economy.
RICS Residential Lettings Survey January 2009 is now out. It shows that demand is now increasing at the fastest pace in the survey’s history (1998). However, the quantity of available property to let is continuing to weigh on rents and rent expectations (which are at their lowest in the survey’s history). Nevertheless, yields are still rising which implies that rents are not falling as fast as house prices.
And with borrowing rates at historic lows and 5 year fixed rate mortgages available, now looks to be a good time for the buy to let investor,
House prices drop by 1.9% in March according to the Halifax but according to Nationwide, the average house price rose 0.9%. So not even the lenders seem to know where the market's going at the moment!
B&B (aka Mortgage Express) has just released some pretty horrible figures for 2008 with arrears (unsurprisingly) well above the industry average.
The following is taken from the Money Morning daily email:
The rise in house sales is not a turning point
The big news was that Bank of England data showed the number of mortgage approvals for new house purchase jumped to nearly 38,000 in February, up 19% on January, and the highest level seen since last May. On top of that consumer confidence picked up, again to the highest level since last May.
So is this a turning point? Well, I wouldn’t bet on it. I think “dead cat bounce” is the more appropriate term. The point is, once things fall far enough, they will rebound at some point. There’s only so low you can go.
Mortgage approvals have been hitting ever more shocking lows for months now. They had to go up some time. As James Ferguson points out in his Model Investor newsletter, even now, mortgage approvals are a good bit lower than when they bottomed out during the 1990s housing crash (they never fell below the 60,000 mark back then). And they are still 44% down year-on-year. That gives you some idea of the scale of the slump we’ve seen.
As Vicky Redwood at Capital Economics put it, “approvals have a long way to go before they get to levels that are no longer consistent with falling house prices.”
The pick-up in consumer confidence is of a similar nature – the balance rose from minus 35, to minus 30. You’d be surprised if it had weakened any further from those levels, particularly as anyone with a mortgage has probably found its cost falling in recent months. As Rachael Joy, a spokesperson for GfK NOP (who carry out the consumer confidence survey), put it, "lower interest rates and a better picture for household bills are restoring some confidence among UK consumers."
But the other interesting point from the Bank of England’s lending figures was that consumers are clearly still not keen to borrow or spend. They repaid £245m of credit card or other non-mortgage debt last month, the highest level since records began in 1993 [and £8bn of mortgage debt]. So confidence is still way too low to translate into any pick-up in high street spending.
And with unemployment continuing to rise, and repossessions set to keep ticking up, there’ll be plenty of housing supply to keep pushing prices lower.
There’s a bigger risk in the future too. While low interest rates might inspire a few people to jump back into the housing market (assuming they can get a mortgage), they should be careful. As participants at our most recent Roundtable pointed out - if there is a recovery in the economy – or a surge in inflation at least - then the Bank of England will rapidly have to reverse its quantitative easing and also start to hike interest rates. That could absolutely hammer anyone who buys now, imagining that today’s rates, or even say 5%, will provide a ceiling for the foreseeable future.”
All of these points are perfectly valid unless, like all good property investors, you take out a fixed rate mortgage at a low rate, buy property well below its current market value and invest in good positive cashflow. .
The Government is to spend what is believed to be millions of pounds of taxpayers’ money on backing a HIPs board game for families to play to “make them realise that HIPs can be fun as well as useful”. Hmmm...what a fantastic use of taxpayers money from the same people who are supposed to be responsible for steering our country through the worst recession since the 30’s!
Useful Links
Find out the postcode of a property from a map on an agents' website Every Google Map link has latitude and longtitude in it - it's the part of the link that looks like this: ll=53.800651,-4.064941. This website can convert the latitude and longtitude into a postcode to enable you to do your research.
So, if you are looking at an agent's website and there is a map and you need the full postcode to do your research all you do is:
- View the source code of the page (click page and then view source in Internet Explorer)
- Look through it for the part of the link with the latitude and longtitude (search for LL=), and then;
- Copy and paste those numbers into the co-ordinate converter at the website above.
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