The demand for high value mortgages has dropped according to lenders.
The general election campaign is also expected to affect the UK housing market.
Demand for mortgages fell sharply in the first quarter of the year in the UK, according to research for the Bank of England.
Lenders reported that this was the third successive quarter of falling demand, the bank’s Credit Conditions Survey found.
Mortgages for high value property saw the biggest fall in demand since the third quarter of 2008.
Demand is however expected to bounce back in the second quarter.
Some lenders attributed the fall in demand over recent quarters to a combination of changes in regulatory policy and concerns about housing affordability, as well as uncertainty about the outlook for the housing market.
However, the predicted recovery might point to the effect of the general election campaign on the UK housing market.
Many prime and super prime buyers are sitting on their hands and want to see what the next government looks like before they commit to a purchase. That this is the most uncertain election in decades has certainly triggered more caution at this level of the market than normal.
The survey suggested that lenders were showing a greater willingness to lend to borrowers who were only able to offer a deposit of less than 10% of the property’s value so far this year. Many of these borrowers would be first time buyers.
The mixed UK property market is claiming more problems as Kingfisher, the owner of the DIY chain B&Q is to close about 60 B&Q stores in the UK.
However, Kingfisher plans to open 60 new outlets under its Screwfix brand this year.
“Kingfisher has said for some time that B&Q UK can adequately meet local customer needs from fewer stores and that some of the stores should be smaller,” it said in a statement.
Kingfisher also announced a 15.2% fall in pre-tax profit to £644 million for 2014.
And in a separate announcement, it said that Kevin O’Byrne, chief executive for B&Q UK & Ireland, would leave the firm on 15 May 2015 “allowing a smooth handover of his responsibilities” with further details to be announced “in due course”.
The store closures, which will result in a £350 million one off cost, mark Veronique Laury’s first major move as chief executive. The former Castorama boss took over from Sir Ian Cheshire as chief executive last September.
The firm, which currently has 360 B&Q stores, has so far confirmed the locations of six store closures: Southampton, Dundee, Baums Lane in Mansfield, Station Road in Stechford in Birmingham, Hyde in Greater Manchester, and Barnsley.
But it said the impact on jobs from the B&Q store closure plan is expected to broadly neutral due to the planned Screwfix openings, which will create 900 new jobs, and plans to redeploy staff to other parts of the business.
B&Q said top executives’ roles would now be more focused on the entire company, it would cut the number of products it sold, as well as unify its IT platform across the group.
Other plans include making the most of its vacant store space and it said it was in discussions with several retailers about sub-letting opportunities.
“We are getting on with this at real pace,” it added.
The announcement comes a day after the group, which also owns Castorama and Brico Depot in France, walked away from its planned €275 million purchase of French DIY chain Mr Bricolage after one of the latter’s shareholders opposed the deal.
The firm’s performance in France continued to be weak, with sales down 6.6% for the year, which it blamed on “an ongoing soft market”, driven by weak consumer confidence and a declining housing and construction market.
But in the UK and Ireland, sales rose 5.4%, which it said reflected a stronger UK economy and more buoyant housing construction.
The number of mortgages being granted across the UK hit a six month high in February the Bank of England data show.
During the month of February, 61,760 mortgages were approved – just over a thousand more than in January.
It was the third month in a row that approvals have risen- and the highest figure since August 2014.
Even though the rise was small, economists said it indicated that the housing market had bottomed out, and was now facing a steady improvement.
Nevertheless the number of approvals is still well below the recent peak of 75,453 in January 2014.
The growing confidence of borrowers in mortgages is also evident as demand for loans and overdrafts are also increasing.
Borrowers are becoming more confident in taking out personal loans and overdrafts, according to the High Street banks.
Annual growth in this type of borrowing, of 4.4% in February, was the fastest in six years, the British Bankers’ Association (BBA) said.
During and after the financial crisis, consumers were more cautious.
There are fears that some people in debt could suffer were interest rates to rise from their historic low.
Some people may now be deciding to borrow to make purchases that they had put off in recent years.
“Demand for loans and other types of personal borrowing is rising at its fastest rate since the financial crisis,” said Richard Woolhouse, chief economist at the BBA.
“Consumers are feeling increasingly confident about buying big ticket items, such as cars or home improvements, as the recovery really begins to take hold.”
However, he pointed out that saving in banks had slowed, partly owing to the comparatively high rates offered for new Pensioner Bonds.
Mortgage lending to home buyers went through an unexpectedly large dip at the start of 2015.
The Council of Mortgage Lenders (CML) said just 41,400 home loans were granted in January to borrowers in the UK.
That was 26% fewer than in December and- more importantly, 16% down from January last year.
The number of loans made to first time buyers was, at 19,000, the lowest monthly figure for 21 months.
The UK property market has been cooling off off since last summer, with prices more or less flat in the past few months.
The previous rapid rise in prices, along with the tighter regulation of mortgage lending, has shut some prospective buyers out of the market.
Completed sales in November, December and January – the most recent months for which data is available – were down on a year ago.
However, this lull is likely to be temporary, as figures from the Bank of England have shown that mortgage approvals for those months – the number of new loans approved but not yet lent – in fact started growing again gently.
That suggests that sales will start to pick up again in the coming months.
Paul Smee, director general of the CML, said: “The traditional beginning of year seasonal lull in lending is slightly more prominent in house purchase lending than in previous years, especially in comparison to the particularly strong levels at the start of 2014.
“Affordability constraints remain a factor for would be borrowers, but we are still projecting lending to pick up over the next few months,” he added.
The increase in the number of mortgage free homeowners means that more properties were owned outright than with a mortgage among households in England for the first time in 2013-14, figures show.
Of the 22.6 million households in England, 7.4 million owned their property outright, and 6.9 million had a mortgage, the English Housing Survey showed. The rest – 8.3 million households, rented their homes.
These numbers mark a change from an evene level among home owners a year earlier.
The data also shows that the younger generation are struggling to own.
In 2013-14, some 48% of households made up of 25 to 34-year-olds rented their home from a private landlord. This had risen from 45% a year earlier, and from 21% in 2003-04.
Over the same 10 years, owner occupation in this age group dropped from 59% to 36%.
Campbell Robb, chief executive of Shelter, said: “The shortage of affordable homes is leaving young adults with no choice but to remain stuck in their childhood bedrooms, or face decades paying out dead money to landlords.”
The English housing survey is a continuous national survey commissioned by the Department for Communities and Local Government (DCLG). It collects information about people’s housing circumstances and the condition and energy efficiency of housing in England.
In April 2008 the English housing survey was created by merging the English house condition survey with the survey of English housing. Information about these former surveys can be found on the National Archive.
The number of homes being built in the UK fell during the final three months of 2014- which is the first such decline for nearly two years.
The 0.2% drop in new home construction compared with a 6.1% increase in the previous quarter during the autumn.
Overall, total construction output fell by 2.1% in the quarter, the Office for National Statistics said- which was worse than an initial estimate of a 1.8% contraction.
The UK housing market has been consistently slowing over the past few months.
Last week, the latest survey from the Royal Institution of Chartered Surveyors (RICS) said that the number of new buyers approaching its estate agency members in England and Wales had fallen for the seventh month in a row.
However, a recent survey of the UK construction sector suggested that activity had picked up again in January and it was still up 18.7% from a year earlier.
A review of house price rise predictions for 2015 by experts by Re-mortgager suggests slower growth in 2015 than 2014.
However, surprisingly there is near consensus among them on what that growth in property prices will be – about 4%.
2014 Property Price Rises Reviewed
The UK housing market saw a spring and summer boom in 2014, particularly in London and the South of England, before activity dropped away a little towards the end of the year.
Recently published figures from the Nationwide Building Society – the first to record the annual change over the whole of 2014 – suggest that UK house prices rose 7.2% during the year.
This is based on the Nationwide’s own lending data and masks some significant regional differences. For example, prices in London rose by 17.8% over the course of the year, according to the lender, compared with 1.4% in Wales.
Another survey, by rival lender the Halifax, says that prices rose by 8.5% over the year, although its official house price index data has not yet been published.
The rise in prices and activity is reflected in the number of people buying carpets. Wilf Walsh, chief executive of Carpetright, says that the outlook is “mixed”, but there are signals of pent-up demand being released.
House sales were consistently above 100,000 a month in 2014, according to seasonally adjusted figures from HM Revenue and Customs (HMRC). It is the first time this has been the case since 2007.
Predictions for 2015.
Activity levels are unlikely to change very much in 2015 compared with last year, according to Ray Boulger, from mortgage brokers John Charcol.
His house price prediction for 2014 looks to be among the most accurate, and in 2015 he has suggested – like many others – that UK house prices will grow by 4% on average.
He says that the general election is likely to dampen activity in the housing market until the result is known, but that recent changes to stamp duty will have little effect. He also says he will not be surprised if the Bank rate – a key factor in determining the level of mortgage interest rates – could end the year at the current, record low level of 0.5%.
Estate agent and housing expert Henry Pryor admits that he underestimated the effect of government stimulus measures on the housing market and prices in 2014.
He too predicts a 4% rise in prices in 2015. The lid could be kept on prices, he says, owing to some “nervousness” among potential high-value property buyers, especially in London.
This London lag is most striking in the predictions of the Royal Institution of Chartered Surveyors (Rics).
Rics, and its global residential director Peter Bolton King, say that house prices in London will be unchanged in 2015 compared with 2014. This will restrict UK house price growth to 3% in the year to come, they say.
Ed Stansfield, property economist at Capital Economics, says that his prediction of a slowdown in prices in London is partly the result of buyers simply saying “enough is enough” with homes in the capital either overpriced or unaffordable.
Miles Shipside, director of internet property portal Rightmove, says that this will lead to prices picking up further out from London in the South East of England as families look for more affordable homes within commuting distance of the city.
Another significant factor in determining housing market activity in 2015 is the level of wage rises.
Martin Ellis, housing economist for the Halifax, says that the first year of consistent above-inflation wage growth for some time could add to demand for homes. However, he too points to the potential effect of the general election and the threat of rising interest rates as keeping that demand in check.
Predictions can always be thrown out by unexpected events, and longer-term estimates must be treated with even more care.
Detached homes have seen the smallest rise in prices of all property types in England and Wales in the last year official figures suggest.The typical home rose in value by 1.1% in the year to the end of October, according to the Land Registry.
But the typical detached house only increased by 0.1%, the latest data suggests.
The typical detached home was valued at £254,378 compared with an average of £161,605 overall.
In the 12 months to the end of October, terraced homes increased in value by 0.6%, prices of semi-detached homes went up by 1.5%, and flats and maisonettes rose by 2.8%. Commentators say this is partially driven by demand.
The Land Registry figures, which suggested prices fell by 0.3% in October compared with September, again showed the regional differences of house price changes.
In London, there was a 7% annual increase in prices, compared with a fall of 5.8% in north-east England.
In a separate report, the Council of Mortgage Lenders (CML) said that London was affected by factors that were unique to the property market in the capital.
“Part of the resilience of London property prices is explained by the city’s global status,” the CML said.
“The political stability of the UK, combined with a 20% depreciation in the value of sterling since the credit crunch, has made the capital an attractive destination for international investors in central London property.
“Another important characteristic of the capital’s housing market is the significant variation in property prices within London. This presents flexibility for those wishing to buy but who find themselves priced out of expensive areas.
“There are often options to buy in other districts, which contributes to the process of gentrification of areas of the capital.”
The lenders’ group said first-time buyers in London were generally a couple of years older than their counterparts in the rest of the UK, they had a higher income, but the vast majority needed financial help from family members to get on the property ladder.
About 28% of first-time buyers were unassisted, compared with 34% in the rest of the UK, the CML said.
Details of the new energy bill were announced by the government to comply with EU green policies and it seems that UK home owners will be the ones picking up the bill.
Although full details have yet to be released preliminary poitns include:
- Households will have to pay an estimated £20 next year to fund clean energy investment, rising to £95 in 2020
- Energy companies to get £7.6 billion from this to invest in low-carbon power
- There is no target for carbon emission levels by 2030
- Longer-term emission levels to be discussed – but not necessarily set – in 2016
Crudely speaking, the bill has been a battleground between Chancellor George Osborne, who favours gas-powered generation, and the Liberal Democrats, who want clean energy.
What the chancellor wants, the chancellor normally gets – and that’s mostly what’s happened in the Energy Bill.
In this case he was willing to concede that householders should pay around £100 a year extra on bills by 2020 to fund clean energy.
DECC argues that in the long term clean energy will save money because renewables and nuclear are dear to build but relatively cheap to run.
But beyond 2020 Mr Osborne has refused to commit. He doesn’t think the UK should be taking a global lead on cutting emissions while competitor economies are not following. And he thinks gas may be a cheap power source in future.
So he has rejected the plan for a 2030 target for cleaning up the electricity sector. This 2030 goal is not legally binding, but it is said to be needed if the UK has a reasonable chance of meeting long-term emission targets under the Climate Change Act.
The compromises made in the battle have increased certainty for investors to create new energy infrastructure until 2020, but they have increased uncertainty beyond 2030.
Prices won’t be certain either. There’s a popular notion that gas will be a cheap source of power. The truth is, it’s impossible to predict whether volatile gas prices in the 2020s will be cheap or expensive.
All parties will breathe a sigh of relief that this seemingly endless feud is resolved – until it comes next year to setting specific subsidies for nuclear and renewables, that is.
The chancellor is adamant that gas will help keep down power bills in the future.
There are many more fragments to come in the energy jigsaw.
Decisions on the way subsidies from bills will be shared between nuclear and various renewable technologies will be made next year.
Key decisions on how to ensure there are enough gas power stations to keep the lights on when the wind is not blowing will be announced alongside the chancellor’s Autumn Statement.
The dream of owning your own home may not be as far-fetched as one think, because around 15,000 people a year are now building their own homes.By avoiding the large profit margins of developers, they can save tens of thousands of pounds.
And it does not need to be a grand design. Most self-built houses are perfectly ordinary homes, which would not be out of place on a modern housing estate.
Most self builders say that the most noticeable benefit has been the cost.
By cutting out the developers, they estimate that they are saving between 20% and 30% compared to building in the conventional way.
It can also be cheaper to buy your own materials than do it through a builder, with good deals said by some to be available on the internet.
One conventional supplier even offers a 25% discount to anyone who is building their own home.
Some of those who decide to take the plunge are being helped by a community-owned advice centre in Swindon, Wiltshire, which offers advice on everything from finding a building plot to insulation or timber frames.But some lenders, particularly the banks, see self-build houses as a huge risk.
The main downside is that lenders want to be certain that the foundations have been properly laid, for example, before giving out the next tranche of cash.
However with the need to pass building regulations, the lenders can now be fairly certain that if you have had stages passed by the local building inspectors from your local council that your construction is sound.
You will also need to take out an insurance policy to cover the theft of building materials or machinery from the site, which could prove very expensive.
And that is before you start looking at the structural warranties you will need on the building itself.
But it is not only budgeting skills you will need.
Self-builders have to manage a team of surveyors, architects, builders and suppliers, not to mention being a diplomat with the new neighbours.
Despite cheaper land and lower labour costs during the recession, the number of people building their own houses has not increased dramatically- at between 15,000 and 20,000 every year.
However given the issues of mortgage affordability and building costs- the self build option could be the way ahead for people to get on to the property ladder.
Registered Office in England, 24 Charlton Drive, GL53 8ES, UK- 3506015 • Data Protection Registration Number- PZ5407728