Which way now for the housing market? There have been some healthy signs recently. Barratt is the latest house builder to forecast a hike in profits. According to property website Zoopla, London house prices have made up the ground they lost during the recession, with gains over the past sixteen months amounting to 21.5%. This is good news for those wishing to remortgage or seek additional finance, as the extra equity in their properties means that loans represent a smaller proportion of their value.

Elsewhere, lenders say that price rises are tailing off, or even turning into falls. Government figures show a modest 0.7% rise on completed sales in May. But all this doesn’t mean there’s been a slowdown in sales – on the contrary, many homeowners are now putting property onto the market, after holding off in the uncertain period before the Budget, and spurred on by the demise of Home Information Packs.

A big factor will be the availability of mortgage finance, coupled with the level of interest rates. Mortgages are now at their most affordable in decades, with interest payments taking a smaller slice of our incomes. There’s also been a modest rise in the number of products available to borrowers, with some higher loan-to-value deals now on offer.

But the market is vulnerable to outside pressures. Many fear that mortgage lending (and borrowing) will fall if the economy stalls – and if banking problems in the eurozone spread. For these reasons, industry experts are forecasting flat prices or falls. According to the Royal Institution of Chartered Surveyors, more of its members now expect prices to fall than to rise over the coming months, while accountants PricewaterhouseCoopers think that the market could be subdued for years.

In this climate, say analysts, the FSA’s plans to further restrict mortgage lending look ill timed – lenders don’t need to be told to be cautious. The big unknown remains the timing of interest rate rises, and it’s this which is pushing borrowers who want security in the direction of fixed-rate mortgage and remortgage deals.

Tags: Economy, Headlines, Housing Market, Markets

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