UK housing market suffers slowdown

The UK housing market suffered a fall in activity in October, figures revealed last Friday, despite mortgages becoming more affordable than at any time for eight years.

There were 44,500 loans worth £6.5 billion (€7.6 billion) issued in the month, according to the Council of Mortgage Lenders (CML), which was eight per cent down on the previous month and five per cent less than a year ago.

The fall in lending came even though low rates mean first-time buyers now have to pay only about 12.3 per cent of their income on interest payments, the lowest level since January 2004. Affordability for movers also improved to its best level since records began in 2002. Lending levels were constrained because mortgage providers are still demanding average deposits of around 20 per cent and the uncertain economic outlook – with the eurozone debt crisis and fears of another recession-hit confidence.

CML director general Paul Smee is hopeful there will be signs of increased activity early next year before a stamp duty concession for first-time buyers finishes at the end of March.

Chancellor George Osborne announced in his Autumn Statement that an exemption on the one per cent stamp duty for first-time buyers for properties under £250,000 (€293,000) will end on March 24. The government said the relief had proved “ineffective” at encouraging more first-time buyers on to the property ladder. The fall in lending activity in October affected both first-time buyers and home movers, according to the CM. First-time buyers took out 16,400 home loans, which was 10 per cent less than the previous month. The 28,000 loans taken out by home movers was seven per cent lower than the previous month and eight per cent lower than a year ago.

There was also a 15 per cent fall in the number of remortgages on the previous month as homeowners opted to stay with existing deals amid expectations that rates will remain at their record lows.