Housing round up: House prices stagnate whilst mortgage levels fall

Posted on December 31st, 2011 | Categories - News

Housing & mortgage round upIn our last housing round up of 2011 we take a look at two sets of figures which show house prices are at best stagnating and possibly falling.

As a result the net level of mortgage lending is also falling, according to new data from the Bank of England.

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Nationwide: House price stagnation to continue

The UK’s largest building society has said that house prices remained broadly unchanged in 2011 with more of the same expected in 2012.

In its latest house price survey the Nationwide said the value of the average home rose by 1% in 2011, despite a fall of 0.2% in December. According to the Nationwide the average house price is now £163,822.

The figures mask regional differences which saw homes in London rise in value, whilst the average price fell in other regions such as Northern Ireland, which saw a massive 8.7% drop during 2011.

Robert Gardner, chief economist at the Nationwide, said: “The 1% rise in house prices recorded over the past 12 months could hardly be described as a strong performance, but against a backdrop of anaemic economic growth and a deteriorating labour market, UK house prices were surprisingly resilient in 2011.”

Gardner continued: “2012 is not shaping up to be much better than 2011 for the UK economy or the housing market.”

Land Registry: House prices fall in 2011

Meanwhile figures from the Land Registry, which are considered by many to be the best indicator of UK house prices, showed a 1.9% fall in the value of homes in England and Wales to the end of November.

The Land Registry use actual sales data to prepare its figures, which means that whilst they lag behind the most popular house price surveys from the Halifax and Nationwide it is often considered the most accurate of the major surveys.

Regional annual house price changes

North West: down 4.8%
Wales: down 1.6%
London: up 1.4%
West Midlands: down 1.8%
Yorkshire and the Humber: down 3.4%
South West: down 1.9%
North East: down 5.4%
East Midlands: down 2.5%
South East: down 0.9%
East: down 2.3%

Source: Land Registry; year to end of November 2011

According to Land Registry data the average UK home is now worth £160,870, down 0.3% during November.

Mortgage repayments

The lack of activity in the housing market was confirmed by Bank of England figures which showed that the net injection of housing equity, in other the amount mortgage balances have reduced, of £8.6 billion in the third quarter of 2011.

This is the 14th successive quarter when net mortgage lending has fallen, but according to the Bank is not down to a rush by mortgage holders to reduce their debt levels, it is simply the result of the sluggish housing market.

In their statement the Bank of England said: “The fall in housing equity withdrawal since the financial crisis is likely to reflect a fall in the number of housing transactions, with little sign that households in aggregate are making an active effort to pay down debt more quickly than in the past.”

Up until the financial crisis of 2007 the UK’s mortgage holders had typically withdrawn equity from their home via remortgages. Equity was withdrawn in huge amounts, for example £12.5 billion was taken in the final quarter of 2006 alone, this money withdrawn was often spent on the high street or used to fund home improvements, helping to boost the economy.

However, when the credit crunch hit banks and building societies tightened their lending criteria making it harder to remortgage and extract equity, falling house prices made the task yet harder,

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