There are signs, at long last, of the beginnings of a proper recovery in Northern Ireland’s housing market. But there remains a real risk that house prices could fall back again in in 2010.
The latest survey from the Royal Institution of Chartered Surveyors reports an increase in property purchases, with more first time buyers entering the Northern Ireland market and investors returning. But, says RICS spokesman Tom McClelland, “This is still not really a normal market.”
For one thing, newly built properties are outselling re-sales, following the recognition by builders and developers that they had to moderate price demands if they were to sell homes. Most of the stock overhang, of new builds and re-sales, has now been disposed of.
“It is only when you get re-sales back to where they were in 2002/3 that we will have returned to a normal market,” suggests McClelland. In fact, there is a real possibility that recent weeks’ higher levels of activity was in part from buyers avoiding the reintroduction of a higher stamp duty threshold. From the end of December, the threshold for stamp duty returns to £125,000, down from its temporary £175,000 limit.
More mortgages available
The other reason for improved sales has been the glimmer of a resurgence in the mortgage market. Low levels of property sales reflected the very limited availability of home loans – both for purchases and for remortgages. But lenders are now offering more competitive products, which suggests that the tentative recovery might be sustained. The latest Bank of England statistical report shows that mortgage lending is gradually increasing.
Lenders will have been given additional comfort about the state of the wider economy and their own risk profile from the fact that arrears levels have fallen. According to the Financial Services Authority, mortgage arrears fell from 2.80% to 2.57% last month. The Council of Mortgage Lenders says that both arrears and repossessions are less severe than was predicted earlier in the year.
Analysis by the UK’s largest mortgage broker, Countrywide Mortgage Services, has found a 43% increase in mortgage applications across Northern Ireland and Great Britain. In addition, mortgage products are becoming cheaper as lenders start competing properly for business. Countrywide reports that average interest rates are now 4.77%, compared to 5.66% a year ago.
While fixed rate mortgages are the most popular, applications for tracker mortgages increased for the fourth consecutive month. There was also an increase in remortgages. According to the Council for Mortgage Lenders, the higher demand for tracker mortgages reflects greater consumer confidence that the Bank of England base rate will remain low for the foreseeable future. Generally, the signs for the property market look good.
Grenville Turner, Countrywide’s group chief executive, says: “Competitive pricing from lenders is making a huge difference to the market with interest rates now much closer to current standard variable rates, which may further boost both the purchase and remortgage markets.”
Mortgage rates come down
This analysis by Countrywide is backed by research from Moneyfacts. It reports that the Post Office (whose products are supplied by the Bank of Ireland) has cut its mortgage lending rates by up to 1.30%; Scottish Widows and Accord cut theirs by up to 0.40%; Yorkshire Building Society by 0.30%; Leeds Building Society by 0.26%; Alliance & Leicester by up to 0.25%; and Abbey by 0.20%. Nationwide has just announced a cut of up to 0.29% on its lending rate.
There are encouraging signs, too, of higher maximum loans to value being approved by lenders. Average maximum loans to value are now 78% – a rise of 3% in one month. Increasing numbers of lenders are competing on LTVs, as well. Newcastle Building Society, for example has just raised its LTV to 80%, while the Nationwide increased its maximum LTV to 85% – or 95% for existing customers moving home.
For all the good news of improved mortgage products, there remain concerns about the impact of possible negative economic developments next year and whether the Republic’s National Asset Management Agency makes a fire sale of properties in Belfast. “There are still big issues about public sector cuts and [the impact of] Nama,” warns RICS’ Tom McClelland.
A Question of Finance
Q. I am due to travel soon with Flyglobespan. Will I get my money back?
A. Flyglobespan has gone into administration and all its flights have been cancelled. Customers with scheduled bookings who paid for their flights using a credit card should be entitled to a refund under the provisions of the Consumer Credit Act. Those who paid by Visa debit card should be able to obtain a refund from Visa. Customers who booked chartered flights are covered under the ATOL scheme, which insures package holidays. Some customers who bought scheduled flights may may be able to claim on their travel insurance – but this depends on the specific terms of their policy. The Association of British Insurers explains that cover for airline closure is not a standard provision of travel insurance policies. “Travel insurance is not designed or priced to cover aireline failure,” explains ABI spokesman Malcolm Tarling. Fears for the viability of a range of airlines have led to the growth of a special product – scheduled airline failure insurance – which covers the Flyglobespan circumstances. People who expected to fly with BA over the Christmas holidays, whose flights may also be cancelled, may be covered by travel insurance policies through provisions that cover travel delays. Again this depends on the exact terms of a particular policy – compensation for disruption caused by strike action is not a standard part of travel insurance.