Housing recovery stunted by 'lack of mortgages'

Published 09th Jul 2009

Barratt Developments and Redrow, two of Britain's biggest housebuilders, today warned that signs of stability in the UK housing market were being undermined by banks' reluctance to provide mortgage finance to borrowers.

Barratt said that it had witnessed a return to the traditional spring selling season this year for the first time since 2007. Visitor levels to new home developments were up 11.9 per cent in the six months to June 30 compared with the previous six months.

Redrow, Barratt’s smaller Flintshire-based rival, also detected a “relatively stable” market over the past six months, with private home sales up by 22 per cent.

However, both said that a lack of mortgage finance was impairing recovery. Mark Clare, group chief executive of Barratt, said: “The market is shut for an awful lot of people. It has removed the opportunity [for many people] to buy their first home.”

Redrow also sounded a note of caution on the mortgage market, stating: “Without doubt this is a major obstacle to the recovery of the housing market and we are of the view that resolving this issue can play a significant role in a recovery of the economy as a whole."

Britain's lenders will come under further pressure today to provide more finance to consumers and businesses as the Bank of England is widely expected to inject a further £25 billion into the economy as part of its £150 billion quantitative easing programme.

Despite growing concerns over the availability of finance, Barratt and Redrow echoed positive sentiment from Persimmon earlier this week when it revealed signs of stability in the UK housing market and a sharp fall in cancellation rates.

Barratt said cancellation rates for new homes have fallen to just under 20 per cent in the first six months of 2009 down from 37.4 per cent in the equivalent period of 2008.

Mr Clare said: “The early signs of stability we saw at the start of 2009 have continued, underpinned by limited stock and improved customer sentiment. We have seen higher sales rates, lower cancellations and prices levelling.”

He said that the market had stabilised chiefly because of a shortage of available new homes: “Stock levels are pretty anorexic at the moment.”

Nevertheless, Mr Clare said the market was stabilising rather than recovering with total sales for the year to June 30, down 29 per cent to 13,202.

Redrow also detected a “relatively stable” market over the past six months, with private home sales up by 22 per cent.

UK house prices have plunged by 20 per cent since the start of the economic downturn.

Halifax reported yesterday a 0.5 per cent decline in house prices in June, compared to the previous month. In the three months to the end of June, house prices declined by 1.9 per cent, the smallest quarterly fall since the first three months of 2008.

Martin Ellis, Halifax's housing economist, said: "These figures provide evidence that the underlying pace of house price decline is easing."

Source: ' Times '

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