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The rung to recovery

14th January 2009 | back to article listings BACK    print this article PRINT

Many predictions are being made about the fortunes of the housing sector for the coming year, with some hopeful of the beginnings of a recovery. House prices slipped considerably in 2008 with transactions slowing and mortgage finance seemingly drying up. This market slowdown has apparently created a desperate group of first-time buyers keen to step onto the first rung of the property ladder.

This is the view of the managing director of estate agency network haart, Russell Jervis. According to Mr Jervis, this "pent up demand" is the key to market recovery and could drive the sector forward in the next year. And he noted that buyer interest is increasing, a trend also recorded in the latest survey from the Royal Institution of Chartered Surveyors (Rics).

Furthermore, affordability has "greatly improved", he stated, adding: "Average house prices are returning to levels last seen three years ago, with first-time buyers in particular in a position to take advantage and get their first step on the ladder."

But although first-time buyers may be keen to buy their first property after being locked out of the market for so long, the question of financing such grand dreams still remains. This is where lenders factor into the equation, Mr Jervis noted, calling for banks and building societies to offer more affordable mortgage deals.

"While mortgage repayments continue to fall for many borrowers on tracker rates, a return of consumer confidence and market activity is dependent on lenders providing the necessary finance at competitive rates. With the Bank base rate now at 1.5 per cent, we would urge lenders to do whatever they can to make affordable mortgages more readily available," he remarked.

One way to boost lending would be for the government to issue residential mortgage backed securities, Rics suggested recently. This could mean aspiring homebuyers would not be "frozen out of the market", the body said. While such a move may or may not arise, there have been positive signs from lenders following the latest base rate reduction from the Bank of England. Abbey has announced new fixed-rate mortgage deals with rate reductions of up to 0.3 per cent, following moves from Halifax, the Co-operative Bank and Lloyds TSB in the last week to revamp their offerings.

If access to finance is increased by lenders or the government, it seems that the bottom rung of the ladder will yield the first step towards a long recovery.

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