July 23 2014 Latest news:
Ben Woods, Business writer
Tuesday, May 13, 2014
Homeowners dreaming of taking the next step up the property ladder are being increasingly left frustrated because of a lack of available properties coming on the market.
New rules to stop the mortgage market spiralling out of control could be causing rates to rise, according to financial information specialists Moneyfacts.
The organisation is urging homeowners to fix their rates now because the Mortgage Market Review is creating extra cost for lenders that is being passed down the chain to people paying off their homes.
A Moneyfacts spokesman said: “As the Mortgage Market Review will make bank’s processes longer and more detailed they may be factoring in increased costs in to their rates.
“We only need to look at recent weeks to see the market is already changing to compensate for these influences. Since the start of April we have seen the majority of lenders increasing their fixed mortgage rates.
“The market is beginning to change with low rates not lasting forever: borrowers looking to fix should act to get the best possible deal.”
Fears are mounting that the country’s nascent housing market revival, which has been boosted by a return of first-time buyers, could now stall because of a lack of supply of family homes on the next rung of the ladder.
The situation is being made worse as middle-market sellers remain stubborn over prices, with one Norfolk estate agent warning that sellers are being unrealistic about the value of their homes.
These concerns have been compounded by fears that Norfolk estate agents locked in a “bun fight” over low housing stocks are creating a false impression of rising house prices by over valuing properties to get them onto their books.
It comes as the East of England continues to see a dearth of new properties coming onto the market, with the Royal Institution of Chartered Surveyors (RICS) reporting a third consecutive fall in April this year.
Simon Rubinsohn, chief economist at RICS, said: “The critical issue for the market remains the lack of second hand supply with our numbers suggesting that the picture is, if anything, getting worse.
“It is too early to conclude whether this will undermine the positive trend in transactions volumes, but clearly the absence of properties to buy will ultimately be a factor in influencing the ability of people to move homes.
“That said, despite the disappointing trend in instructions, a net balance of 39pc of surveyors expect to see sales levels increase as we head into the summer.”
The government’s flagship economic policy – Help to Buy – administered a shot in the arm to the UK housing market by handing keys to a tranche of first-time buyers who had previously struggled to put a deposit on a home.
But while the stimulus package has been broadly welcomed by property developers for increasing demand, it has also raised alarm bells among some economists who fear it maybe helping to inflate a potentially hazardous property bubble.
Moves have been made in recent weeks to take a firmer grip of the resurging housing market by introducing new regulations to make it tougher to secure a mortgage.
But the rules outlined in the Mortgage Market Review have been met with scepticism by some aspirational homeowners amid concerns that the detailed “lifestyle questions”, designed to scrutinise spending habits, may probe too deeply without posing an accurate view of a person’s ability cope if interest rates rise.
Some estate agents fear that tighter legislation – coupled with low housing stock – will cause the market to slowdown just when it was beginning to gain traction again.
Matt Chapple, branch manager at Musker McIntyre in Norwich, said a desperation from some estate agents to secure properties across Norfolk was causing house prices to be listed higher then they should be.
He said: “There is a distinct difference between what people are selling for and what estate agents are valuing for because they are desperate to secure the stock – it is creating a bun fight between estate agents. It facilitates a false economy because the headline price is not what it eventually sells for.”
Mr Chapple said sellers misconstruing the state of the housing market was also creating a real problem for homeowners looking to make their second purchase.
“What we generally find is that people trying to buy properties in the £250,000 to £200,000 mark – which will be their second purchase within the housing market – will sell there property for £150,000 to £180,000 in a good location and then find that the vendors are not in a hurry to sell to their property.”
He pointed to one instance where a seller on Norwich’s Newmarket Road was refusing to except any offers below £280,000 because he did not have a mortgage and is not under pressure to sell – even though his property is only worth £250,000.
“It means that some people looking to buy their second home are having to move into rented accommodation until they get a good price,” he added.
But Chris Pearce, senior negotiator at Pymm & Co, said there were areas of Norwich where prices were now higher than before the financial crash due to pent up demand at the bottom end of the market.
“In parts of Norwich house prices have increased by more than 7pc. North city, for example, is higher than it was in 2007 before the crash.”
He claims that house sales remain busy upto to the £250,000 mark because there were parts of Norfolk where properties always sold regardless of the market conditions.