Mortgage approvals dropped to a 19-month low in November 2010 as low wage hikes and strict lending measures kept the UK property market weak. According to the British Bankers' Association , the month’s 30,776 mortgage approvals was down by more than 25% from the number in October 2009.
Experts believe that with the current market being at only half the level it was in the years leading up to the 2007 crash, house prices are likely to fall further in 2011.
“The BBA data showing mortgage approvals edging down further to a 19-month low in October reinforces our belief that house prices will trend down to lose around 10% from their peak 2010 levels by the end of 2011,” says IHS Global Insight chief UK economist Howard Archer. “In our view, the housing market has got little going for it at the moment, apart from low mortgage rates – and that is if you can get a mortgage.”
Archer lists unemployment, modest earnings growth, the housing shortage and the difficulty in getting a loan among the reasons why, despite low interest rates and no stamp duty for first-time buyers, the number of potential buyers dipped in 2010.
There was a noticeable decline in mortgage applications and approvals in the last months of 2010. From a high of 45,600 at the end of 2009, the number has dropped by about a third. The value of loans hovered at £8.1 billion in the fourth quarter of 2010, down from £10 billion in December 2009.
Expecting rent rise in 2011
In a survey conducted by top UK property listings site Rightmove in October 2010 among Britons who rent or will rent their homes, 42% expect a rise in rents in 2011 – up from 37% who said the same in the fourth quarter of 2009.
A shortage of buy-to-let sales means a shortage of rented accommodation available, and therefore the rents may go up higher. In October, U.K. mortgage lending fell 9% percent from a year earlier.
People looking for homes to rent are “experiencing a struggle to find suitable rental accommodation and losing out on properties to higher bidders,” says Rightmove director Miles Shipside in the report. “The momentum for further rises continues.”