UK lenders continue to let down property buyers

Buyers in the UK are still failing to overcome the significant barriers to home ownership that the current housing market represents, according to the National Association of Estate Agents.

The latest monthly market report from the organisation showed only slight decreases across supply and demand in May. In May, 275 people registered with a branch, compared to 277 in April. However, this is still well above data from a year-on-year comparison, where a figure of 265 was reported for 2010.

The average number of sales agreed per branch stayed at eight for the fourth month in a row. Nevertheless, the percentage of sales to first time buyers increased from 21% in April to 24% in May. The average number of properties for sale per branch decreased slightly from 69 to 68.

According to the NAEA, the combination of large deposit demands, pressure on household finances and the gloomy economic picture for the UK is causing stagnation in the housing market.

‘Demand for property remains consistent but the barriers to buying are proving impossible to overcome for the vast majority of consumers. Our members have likened the housing market to an obstacle course, with many falling at the first hurdle, as the finance required to buy just is not available. If they can actually get finance they are struggling to find the right property as there is not enough supply to offer the choice and then they still have to find the money to pay for Stamp Duty,’ said Wendy Evans-Scott, president of the NAEA.

‘Sales have continued at a similar level thanks in part to increased activity within the £1 million plus homes category with significant interest from foreign buyers in London and the South East. There are severe restrictions elsewhere though in the market as buyer interest has failed to translate into transactions,’ she explained.

‘The banks must find a balance between the loose lending of the boom and the rigidity of the current lending rules; house buyers need the Government to act in a sensible and proportionate way by encouraging the banks to offer adequate financial help to buyers,’ she added.

Meanwhile the National Landlords Association said that although there has been an increase in buy to let mortgage products in recent weeks they need to be sustainable to encourage private landlords to increase their portfolios.

And a report from consumer giant Which? says that variable rate mortgage customers being squeezed by lenders as 95% of lenders have failed to fully pass on cuts in the base interest rate to their Standard Variable Rate (SVR) mortgage customers.

With many borrowers trapped on SVR mortgages, it warns that a rate increase could leave thousands of households in financial difficulty as a 1% increase to the base rate would add over £50 to the monthly repayments of someone with a £100,000, 20 year mortgage.

Its research found that more than a fifth of lenders have increased their SVR since the base rate hit an all time low of 0.5% in March 2009. Cheltenham & Gloucester and Lloyds TSB Scotland were the only lenders who are part of the four biggest banking groups to pass on the full cut.

At 6.08%, KRBS has the highest SVR on the market, more than 12 times the base rate. The five other direct lenders with the highest SVRs are all building societies. The average SVR is now 3.48% above the base rate, compared with 1.95% in September 2008.

‘Banks have enjoyed increased margins on mortgages for the last few years and when the base rate rises again, few lenders will be able to justify passing the full amount onto their SVR customers,’ said Which? chief executive Peter Vicary-Smith.