Housing & mortgage round upThe first week of the New Year brings further evidence that the UK housing market is stagnating not helped by tight mortgage lending criteria, which looks set to get worse if the latest Bank of England report is correct.

It could be worse though, you could own a property in Dublin, according to one survey the Irish capital has seen property prices fall by a staggering 64.2% since the peak of the housing boom in 2006.

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Halifax: House prices fell in 2011

New figures from mortgage lender Halifax show that house prices in the UK fell by 0.9% in December and by 1.3% for the full year of 2011. The Halifax figures disagree slightly with data released last week by the Nationwide, the UK’s largest building society, which showed that house prices had actually risen by 1% in 2011.

According to the Halifax the average house price in the UK is now £160,063.

Echoing comments made last week by the Nationwide, Halifax said that the UK housing market has been surprisingly resilient in the face of tough economic conditions and rising unemployment.

Looking towards 2012 Halifax predicted prices would remain stable but that the outlook was “uncertain”.

Martin Ellis, housing economist at the Halifax, said: “If the UK can avoid recession, we expect broad stability in house prices in 2012.”

Mr Ellis continued: “There is, however, considerable uncertainty regarding the prospects for the UK economy, which will, to a large extent, depend on how events in the Eurozone unfold.”

“In addition, the extent to which households choose to reduce their debts will also affect growth.”

With the economic conditions still tough, rising unemployment and tight lending criteria the stagnation in UK property prices looks set to continue into 2012. If the Council of Mortgage Lenders (CML) forecasts are accurate it also looks likely that the number of property transactions will fall further in 2012; sales in the first 11 months of 2011 were down by 3% on the same period of 2010.

Bank of England: Borrowers will find it harder to get a mortgageBank of England: Borrowers will find it harder to get mortgages

The Bank of England’s quarterly lending survey has shown that prospective borrowers are likely to find it even harder to get accepted for a mortgage in the coming months as mortgage lenders tighten their lending criteria.

The Bank said that lenders were becoming increasingly worried about both the state of the economy and falling house prices, as a result they are likely to become more conservative in their lending decisions.

The Bank’s reports said: “Factors such as the cost and availability of funds, the economic outlook and expectations for house prices were all expected to pull down on credit availability.”

The report continued: “Lenders expected the proportion of total loan applications being approved to fall over the coming quarter with some lenders commenting that they had revised down expectations for households’ disposable incomes and hence the affordability of taking out new secured loans.”

Property experts believe that any growth in mortgage lending is likely to only come from borrowers who have larger deposits and that many prospective homeowners are put off even from even applying for a mortgage because of the adverse publicity surrounding mortgage lending criteria.

It could be worse; take a look at Ireland

The house price surveys from Nationwide and Halifax show a stagnant housing market but both mortgage lenders have said how surprisingly resilient the UK housing market has been, however it seems homeowners in the UK have got of lightly compared to those in Ireland

Figures released by the Sherry FitzGerald Group have shown that house prices in Dublin have fallen by a massive 64.2% since the peak of 2006. The same group says prices across the country of Ireland have fallen by 58.2%.

The figures from the Sherry FitzGerald Group were backed up by two other surveys, the first from myhome.ie who said that property prices in Ireland had dropped by 50% since 2006 and daft.ie reported a fall of 8% in the past quarter alone.

Irish property experts believe one of the main reasons for the fall in house prices is the lack of mortgage finance from the Irish banks who were particularly hard hit by the credit crunch. In 2011 Irish Banks made just €2.3bn (£1.9bn) available for mortgage financing, a drop of 90% from the €40bn available prior to the credit crunch.  Just 13,000 mortgages were agreed in 2011, compared to 200,000 in 2006, further emphasising the decline in the Irish housing market.

However many think that the market is over reacting, Marian Finnegan, chief economist, at the Sherry FitzGerald Group, said: “There is no doubt the market is over-correcting.”

She continued: “The pace of deflation picked up in the last 12 months, which illustrates a market that is in over-correction or in freefall.”

Ronan Lyons, economist at daft.ie said:  “Given that the property market in any developed economy is inextricably linked to the mortgage market, it’s no surprise that prices are down 50% or more, if lending is down by over 90%.”

He continued: “If you think of the fall in house prices as a necessary correction, whose size is determined by fundamental factors, then it is better for the prices to race to the finishing line than to crawl there.”

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