House purchases reduce by half
The number of people purchasing a house has fallen by almost half over the course of the last twelve months. The latest figures from the Council of Mortgage lenders revealed that new purchases fell by another 1% from February to March this year, with 46,500 individuals buying a house, compared with 89,000 sales for the same period last year.
There are several reasons for this decline. Firstly, as lenders continue to restrict their lending criteria following the losses made on the US sub-prime market, it is more difficult to be accepted for a mortgage or loan on a property. This is particularly true for first time buyers, who are essential in order to keep the housing market buoyant. With maximum loan to value ratios being reduced by lenders, first time buyers are having to find additional money for a deposit, whilst still needing to borrow on high income multiples. With talk of house prices reducing, many are continuing to rent until things settle down and they have managed to build extra savings.
Buy to let investors, who have accounted for a large percentage of property purchases over the past few years, are also finding it tough as, once again, lenders are restricting their criteria and rental yields are not sufficient to justify high loan amounts. This is causing the maximum loan to value on buy to let properties to be reduced to around 75%, whereas it was possible to obtain up to 85%, or even 90% LTV at this time last year.
Finally, there is a general lack of confidence in the housing market at present. Much of this is due to the constant doom and gloom we hear from the media who seem to thrive on headlines such as the “credit crunch”, global recession and forecasts of house price crashes. What we are witnessing at the moment is a correction in the market, along with lenders taking a more sensible approach with regard to granting loans and mortgages and as soon as everybody realises this we might slowly start to see signs of recovery in this important sector of the economy.
