Gross contractor mortgage lending is now at its lowest point since April 2000 according to the latest figures released by the CML. Lending dropped by 12% between April and March and now stands at £10.2 billion. The Council says that the fall was due to the seasonal decline as Easter was in April.
Although there are now more mortgage products available it’s still hard for contractors to purchase a home unless they have can put down a large deposit.
The cuts in public spending that were announced at the beginning of the week are likely to slow down the economic recovery and this will have a knock-on effect as far as the housing market is concerned. However it is expected that interest rates will remain low for the immediate future.
One area that will suffer from government cuts is the Kickstart programme. Kickstart restarts previously pulled private housing projects and the Homes and Communities Agency has already confirmed that £50m of this year’s £420m budget will be chopped and a further £100m will go from low-cost home-ownership schemes.
Kickstart came to life in the last Labour budget and was designed to bolster housebuilders who had stopped construction during the recession. £400m was invested in the project last year with the result that building began on 9,000 new houses. The UK currently has an acute housing shortage and yet in 2009 we saw the lowest total number of homes built since 1923; just 120,000.
Although the coalition does plan to address some housing priorities, it is as yet unclear exactly what form these will take. The support schemes that were introduced during the recession are due to end soon and the repayment date is getting closer. This will leave a funding gap that needs to be addressed, otherwise lending will be curtailed further.
Savills estate agents believe the situation in the housing market has now reached a critical point. There is currently a lack of demand although more properties are being put on the market. They hope that any further decline in the market could be stalled by the welcome abolition of HIPS.
On the down-side, the new rate changes on Capital Gains Tax might act as a deterrent to residential landlords and people wanting to buy a second home.
We will have to wait until the Chancellor delivers the emergency budget on June 22nd to learn the full extent of the cuts and the potential long-term ‘damage’ they could have on the housing market.
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