Commenting on yesterday’s MPC decision to keep rates at 0.5%, he said: “There has been more positive news on the housing market over the last month, with Nationwide’s real, i.e. non seasonally adjusted, house price index showing increases for each of the last 2 months and a net fall of only 0.8% in the first 4 months of this year. Estate agents have been reporting increased interest from both first time buyers and movers since the beginning of the year and some of that interest is now translating into sales, fuelled by a significant improvement in affordability as a result of a 20% drop in house prices and lower mortgage rates.
“The good news on the mortgage front is that over the last few weeks lenders have been increasing the availability of mortgages up to 80% and 85% LTV, but deals available up to 90% are still thin on the ground. I expect the choice of deals available up to 90% to increase over the next few months but the return of the 95% LTV mortgage is still some way off for most borrowers, although Nationwide offers mortgages up to 95% for existing customers moving home.
“Other positive news for the housing market comes from the RICS monthly survey, which is now reporting the average length of time taken to sell a property is slowly declining and that relatively little new stock is coming onto the market, despite the increased number of forced sales. Furthermore April’s Consumer Confidence Index from Nationwide recorded its largest rise for 2 years.
“These are all indications that conditions in the housing market are now improving and I expect the market to stabilise by the third quarter of this year and house prices to show a net fall of only 5% in 2009. However, house prices are unlikely to recover quickly… the prospect of increases in interest rates, plus lenders’ less generous affordability calculations, will inhibit house prices increasing too quickly.”
