Assetz® News - The mortgage boost

The mortgage boost

7th April 2009 |

Even as the recession rolls on, with Alistair Darling admitting it will be worse than he previously forecast, the last few weeks have not been short of potentially positive news for the property market.

For investors, this may suggest that now is a good time to buy, with the beginning of a take-off at hand. Increased sales, higher prices and more mortgages being lent all appear to be good signs.

The question, of course, is whether these add up to a pattern, are illusory, or just a blip. Nationwide's own chief economist Fionnaula Earley said the lender's figures for March were not in themselves conclusive proof of a revival. She stated: "While the rise in prices in March is welcome, it is far too soon to see this as evidence that the trough of the market has been reached."

Another view on this subject was provided by the director of property website Mouseprice.com Selwyn Lim. He suggested that the contrast between the March figures from Nationwide and those from Halifax - which indicated a 1.9 per cent drop - were proof that such statistics are like "crocodile teeth", going up and down in a fashion that means no clear conclusions can ever be drawn from a single month's data.

He stated that such surveys are "more of a feature of index volatility than any underlying movement in real house prices".

However, Mr Lim suggested, the increase in mortgage lending tells a different story. The 19 per cent rise in loans for house purchases recorded by the Bank of England represents something far more tangible.

He remarked: "Those increases in volumes for mortgage approvals [are] encouraging, far more encouraging than the volatility that we've seen in the house price indices."

The mortgage market is also unveiling other good signs, according to head of mortgages at financial advisory firm Bestinvest, Peter O'Donovan. He noted that a particularly positive sign is that more mortgages are emerging that suit first-time buyers, saying: "[Lenders] don't plan this in a week or so, it is something they have given thought to, but the government has been banging on for a long time about trying to get more people back in the market and that means first-time buyers." The sort of product he may have been referring to would be examples like Abbey's new four-year fixed-rate mortgage at an 85 per cent loan-to-value.

Such deals will help the market as a whole, Mr O'Donovan predicted, commenting: "It suggests that more and more people are actually looking at the market and therefore if there are more buyers, then it means that eventually the prices are going to at least stabilise and then hopefully start to increase."

This, of course, is exactly what investors hoping they have caught the bottom of the market will be looking for. If the mortgage sector starts to reveal more positive signs, it could be a clear indicator - rather than a tentative one - that the property market is on the mend.

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