Perspective News

The UK housing market remains lacklustre and property prices appear unlikely to show a marked improvement in the immediate future. The Land Registry reported house prices posted a monthly increase of 0.8% during April, the first time since January 2011 the figure has been above zero and the largest growth since January 2010. This follows a drop of 1.1% in March – their biggest monthly fall since February 2009. During the past year to April, house prices fell across England and Wales, however, London experienced an increase of 5%. According to the Land Registry, the average house was priced at £163,083.

That said, the Halifax reported a monthly drop in house prices of 1.4% in April, and an annualised fall of 3.7% – the largest decline since October 2009. According to the Halifax, the average home costs £160,395. The mortgage lender pointed to signs house prices are stabilising – albeit at a level below the historical average. Halifax described the underlying trend as one of “modest decline”, although the downward path is likely to be tempered by a slight improvement in the employment market and low interest rates. Borrowing rates have remained at an all-time low of 0.5% since March 2009.

Property website Rightmove.co.uk reported UK sellers raised asking prices during April to their highest levels since June 2008, reaching a level of £238,874. Average asking prices posted an increase of 1.3% in April compared with March, as a higher-than-usual number of bank holidays during April constrained supply

The Ernst & Young ITEM Club expects the household debt-to-income ratio to fall from 157% at the end of 2010 to 139% by the end of 2014. The study claimed soaring house prices during the decade leading up to the financial crisis have contributed to some householders running up very high debt-to-income ratios. Ernst & Young does not expect UK consumers to start benefiting from the economic recovery until 2013.

According to the ITEM Club, almost 70% of homeowners have tracker mortgages, and therefore UK households have a high sensitivity to movements in interest rates. Exceptionally low interest rates have provided a welcome buffer for borrowers – however, amid continuing tight credit conditions, many households are likely to have only limited ability to cope with higher interest rates. Looking ahead, a swift procession of interest-rate rises could cause particular problems for borrowers. Indeed, The Council of Mortgage Lenders forecasts 40,000 UK households will have their homes repossessed during 2011.

The contents of this article should not be construed as advice and do not necessarily reflect our views. Independent Financial Advice should always be attained in order to assess your own individual circumstances.