There hasn’t been much good news to shout about in the housing market recently, but a glimmer of hope has crept in after the CML announced that mortgage lending increased in November.

The number of people taking out a fixed rate contractor mortgage in November was the highest seen for more than two years. 65% of the 47,000 mortgages taken out were fixed rate deals as borrowers took advantage of the good deals available. The Post Office and Nationwide are amongst the providers to have slashed the rates on their fixes as the Bank of England base rate remains at 0.5%.

Despite November’s increase, Howard Archer from HIS Global Insight explained that the UK’s housing market is still low and will probably come under further pressure this year. He expects house prices to fall by as much as 5% as the market is weighed down by rising unemployment, weakened economic activity and low consumer confidence.

First time buyers took out 17,300 mortgages worth a total of £2.1 billion in November. In November 2010, the typical first timer spent 13% of their income on mortgage interest payments. By November 2011, this had decreased to 12.2%.

The CML remarked that although we have seen a significant decrease in the number of first time buyers since the start of the recession, the proportion of mortgages granted to them has stayed reasonably steady. Last November, 37% of all mortgages went to first timers. There was also a 2% year on year increase in the number of mortgages granted to people moving home.

Paul Smee, the director general of the CML, expects to see first time buyer activity increase in the short term as purchasers rush to complete before the stamp duty holiday ends in March.

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According to a new study, first time buyers in Scotland pay a lower proportion of their earnings towards their contractor mortgage repayments than people in other parts of the UK.

In the final quarter of 2011, Scottish borrowers spent an average 20% of their income on their mortgage payments compared to 27% in the rest of the UK. Over the past 27 years, the average mortgage payment for first timers and those moving home was 30% of income.

The research from the Bank of Scotland showed that East Ayrshire was the most affordable UK local authority. A typical mortgage in the area would cost the buyer 15.7% of local average earnings. North Ayrshire and West Dunbartonshire followed close behind with 16.2%.

At the other end of the scale, a typical buyer in Edinburgh forks out an average 26.2% of local earnings on his or her mortgage payment.

However, Dr John Boyle from Rettie & Co said the housing market north of the border was still suffering. Affordability has been boosted by falling house prices and lower mortgage rates but high deposits and stricter mortgage lending criteria have made it harder for first time buyers to get a foot on the housing ladder.

Bank of Scotland housing economist, Nitesh Patel, explained that mortgage payments for new borrowers in Scotland now take up the lowest proportion of earnings for almost ten years. If, as is widely expected, the Bank of England keeps the base rate at its historic low throughout 2012, affordability should remain favourable this year.

Mortgage payments across the UK have nearly halved since 2007 when they accounted for 48% of income. Buyers in Greater London however still spend 35% of their income on their mortgage and those in the South East spend 33%.

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Confidence in the British housing market is the lowest it has been for over a year as fewer contractor mortgage holders expect to see house prices increase in the next few months.

The most recent Housing Market Sentiment Survey from Zoopla.co.uk shows that only 55% of homeowners think that residential property prices will increase in their local area in the next six months. Three months ago, the figure was 59%.

Those who do expect property prices to rise during the first six months of 2012 predict the rise will be just 2.2%.

Homeowners still believe their property is a cut above the rest and will outperform the average. Despite predicting an average 2.2% increase for other homes in their locale, they expect their own home to increase in value by 2.8%. 29% of the survey’s respondents expect local house prices to fall but when it comes to their own property, only 24% expressed that sentiment.

Homeowners in the capital continue to buck the trend with 72% of residential property holders expecting to see house prices rise in the first half of 2012. Owners in London have predicted that house prices will increase by 4.7% in the first six months of this year.

48% of those surveyed said they will only believe the property market is improving when it becomes easier to obtain a mortgage, whilst just 11% of those surveyed believe mortgage availability has improved in the last three months.

Nicholas Leeming from Zoopla.co.uk said homeowner confidence has been battered by the general economic uncertainty. We are unlikely to see confidence return to the housing market until the economic outlook improves.

However, the housing market in London continues to be detached from the rest of the country. Overseas investors are still buying properties in the capital and this has led to increased prices and confidence levels for Londoners.

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According to the Royal Institution of Chartered Surveyors, house sellers are becoming greedy and asking unrealistic prices.

The RICS said that the number of new instructions increased for the third consecutive month in December. The biggest increase in supply came from London, where new instructions rose to the highest level in nearly seven years. However, despite the number of new inquiries from buyers increasing slightly, expectations for future sales are flat due to unrealistic pricing from some vendors.

The latest RICS survey shows that house prices continued their downward trend albeit at a slower rate than in previous months. The only area to experience a rise in prices was London, whilst Humberside and Yorkshire and the West Midlands suffered the largest falls. 21% of the surveyors questioned expect house prices to fall further in the next three months.

Ian Perry, an RICS housing spokesman, said a lack of supply had been a major problem in some areas of the UK so it was pleasing to see more sellers entering the housing market in December. However, sellers must set a realistic price if they have any hope of selling their property within a reasonable timeframe.

The continuing turmoil in the Eurozone is likely to deter prospective buyers over the coming months and strict contractor mortgage lending criteria will prevent many prospective first time buyers obtaining the home loan they need.

Despite the economic gloom that heralded the end of 2011, sales activity managed to hold up reasonably well with average completions of 15.2 per surveyor for the final quarter of the year.

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Contractor mortgage seekers will be aware that house prices throughout the world have been affected by the global economic crisis but while people in the UK may think they’re suffering badly, things are even worse in countries like Ireland and Spain.

The world’s major housing markets registered a 1.5% rise overall in the third quarter of 2011. That’s the weakest increase since Q2 2009 and experts are now concerned that the next Global House Price Index from Knight Frank will reveal negative results.

Ireland saw house prices drop by more than 14% year-on-year in Q3 last year. Prices in Cyprus dropped by 6.6% and the decrease in Spain was 5.5%.

At the other end of the scale, house prices in Hong Kong increased by almost 20% annually. The Estonian housing market rose by 14%, while France saw prices rise by 6.7%.

Ireland is now propping up the bottom of the Global House Price Index league table with -14.3%, followed by Russia at -10.7% and Ukraine at -8.4%. At the top, Hong Kong and Estonia are followed by India, where prices rose by 13.9%, Taiwan by 12.7% and Slovenia with an annual house price increase of 9.0%. The UK comes in at number 30 with a decrease of -0.5%.

Between 2004 and 2007, housing markets around the world were recording double-digit annual growth. Those times are long gone. This latest index reflects prices in the third quarter of last year, before the Eurozone crisis peaked. The fourth quarter index will reflect the full impact the crisis in Europe has had on global house prices. It may not make pretty reading!

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The Bank of England had some distressing news for contractor mortgage seekers last week when it said that it was about to get harder to obtain a home loan.

The BoE produces a quarterly mortgage lending activity survey and the latest one shows that lenders are expecting to tighten their credit scoring criteria in the coming months. Hardly surprisingly, lenders are concerned about the poor state of the UK economy and falling house prices.

The latest survey showed that lenders expect to approve a lesser proportion of mortgage loan applications and some lenders said they had revised their figures for calculating affordability. This strategy has already deterred a lot of potential purchasers from applying for a first time buyer mortgage.

Mortgage rationing has been in place since the onset of the global economic crisis in 2007. Lenders no longer had a ready supply of available funds for mortgages and house prices started to fall. Lenders also started to demand deposits of between 20% and 25%, which effectively put home ownership out of the reach of many first time buyers.

These factors have all contributed to the stagnant housing market we see today. And it now appears that worse is still to come.

The only good news to come out of the survey is that mortgage defaults are on the decrease and this trend is expected to continue over the next few months.

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Bellway homes, the UK house builder, has reminded first time buyers that the stamp duty holiday on new homes is about to end.

Homes costing less than £125,000 do not attract stamp duty but people buying a property costing £125,000 or above have to the tax at a rate of 1% of the purchase price.

In March 2010, the government increased the threshold for first time buyers to £250,000 to make it easier for them to enter the housing market. However, on March 24th that relaxation comes to an end.

Steve Rose, the sales director at Bellway, explained that thousands of first time buyers have taken advantage of the stamp duty holiday, but time is running out.

Bellway was also pleased to learn that contractor mortgages for people with only a 5% deposit were to return. The government announced that a 95% mortgage would be available from leading lenders as past of its National Housing Strategy.

Maria Seed said that first time buyers only spend about one eighth of their monthly income on mortgage interest repayments. However, the average rent is now £720 a month and this means first time buyers struggle to save enough for a deposit.

Data from the CML showed that just 36% buyers bought their first home without financial assistance from friends and family in Q3 last year. Average deposits stand at more than £26,000, double the requirement in 2007, when 63% of first timers were able to buy without turning to others for assistance.

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People with a contractor mortgage in Bristol might be interested to learn that the city’s housing market is outperforming many of the other UK regions. The average price of a residential property in Bristol is now £224,982.

Nationwide’s latest research shows that property values in Bristol increased by 4% in the final quarter of 2011 when viewed against the comparable period of 2010. This might seem like a small increase when you consider the speed at which house prices rose during the housing market but, but following a 3% increase in quarter 3, Bristol is now one on the best-performing provincial cities in the UK.

House prices in Bradford rose by an astonishing 10% last year, followed by Cambridge at 7% and Bath at 5%. London, with a house price increase of 7%, is treated as a region rather than a city in Nationwide’s table.

An increase in house prices is obviously good news for existing property owners, but for struggling first time buyers it provides little comfort.

Robert Gardner, the chief economist at Nationwide, said that although the housing market did not put up a strong performance last year, house prices did not suffer too badly despite weak economic growth and rising unemployment.

However, he went on to point out that mortgage approvals were still well down on the boom days and demand and supply were both weak. The weakness in both demand and supply ensured that prices did not move strongly either up or down. Gardner expects this year to be much the same as last and if economic conditions deteriorate buyers could be put off entering the market.

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The housing market divide between the north and south of the UK is now at its widest point for more than ten years and it is expected to grow even further.

47% of the total value of all house sales in England and Wales can be attributed to the South East and London. In 2000, house prices in the South of England had seen five years of rapid growth leaving the North lagging behind.

However, Lucian Cook, one of the directors at Savills, says the current gap reflects the North’s reliance on public sector employment and its higher dependence on contractor mortgage funding.

Mortgage lending institutions are granting fewer home loans and only 46% of all housing transactions are mortgage funded. The primary source of funding has become equity due to the high deposit requirements laid down by lenders. Furthermore, whilst house prices in the north have been dropping, those in the south have continued to generate significant equity.

Mr Cook says the first quarter of 2008 was the turning point. Once the recession started to bite and the clampdown on mortgage lending started to constrain the market. The London housing market has continued to benefit from rich foreign investors but the recession had a significant impact on housing sales in all but the most expensive property brackets, he added.

Figures from the ONS suggest that average property prices have dropped by £9,000 since 2007 and the average home is now worth £195,000.

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Although first time buyer homes are now at their most affordable since 2003, the number of people obtaining a contractor mortgage to buy one has dropped to an all time low, according to the Halifax.

A lot of properties in the North and the Midlands could be bought with a mortgage of between £80,000 and £95,000 – well within the reach of a young first time buyer, the UK’s biggest mortgage lending institution said.

The First Time Buyer Review for November discovered that houses bought by first timers were affordable in 44% of the UK’s local authorities. When the property market peaked in 2007, that figure was just 5%.

Despite this improved affordability, only 187,000 first time buyers came to the market in 2011, well down on the 568,200 in 2001. Whilst properties in the north may be within their price range, they are effectively locked out of the housing market in the south because of steep deposits and sky-high prices.

South Ayrshire is the most affordable area for a first time buyer, with average property prices standing at 2.65 times average gross annual earnings. The most affordable town in southern England is Peterborough, but at just 75 miles north of London, average house prices are four times average earnings.

At the other end of the scale, a property in the North London area of Brent would cost nine times the average local income. It’s not much easier to buy a home in Oxford, where typical prices are 7.75 times the average local income.

The buy to let market, on the other hand, enjoyed a boom year in 2011. Residential landlords took out nearly 90,000 mortgages on the first three quarters of last year compared to 68,000 in the first nine months of 2010.

There is a glimmer of hope for first time buyers as deposit requirements decreased to £27,032 last year. However, that is still more than the average gross annual salary for the majority of young adults and with landlords increasing rents, 64% of first time buyers had to rely on help from their relatives to raise a deposit in 2011.

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According to the Royal Institution of Chartered Surveyors, the shortage of available housing in the UK will ensure house prices do not drop too severely this year.

The London based group predicts that house prices will decrease gradually during 2012 and end the year about 3% lower than in Q4 2011. The RICS says prices in London will move sideways whilst northern England will register the weakest performance.

Simon Rubinsohn, the chief economist at the RICS, explained that the general economic climate will have a profound influence on the housing market. As unemployment rises, prices could fall, but the general lack of supply will prevent house prices dropping significantly.

Demand for housing has dropped as contractor mortgage hunters struggle to secure finance and the government’s spending cuts squeeze household budgets. There is unlikely to be an upswing in first time buyer enquiries, at least during the first six months of the year, the Institution says.

It is now widely expected that the Bank of England will keep the base rate at its historically low 0.5% until 2013 and this will keep mortgage interest rates down. The RICS expects to see the number of house purchases increase slightly to 880,000 this year, but this would still be way down on the 1.67 million registered in 2006.

The RICS November estate agents survey found that East Anglia, Northern England and Yorkshire were the areas where most agents predicted falling house prices. London was the only region where more agents predicted a rise in prices than a fall. London benefits from foreign investors and although the continuing global economic turmoil could affect performance in the Capital, the London housing market is still a safe haven.

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People looking for a contractor mortgage may like to know that the National Association of Estate Agents has predicted that the UK housing market will begin a gradual recovery this year.

Peter Bolton King, the Chief executive of the NAEA, said that although their will be a gradual recovery, we should not expect to see a major upturn from the conditions of 2011.

He does not think that house prices will fall significantly in 2012, rather they will remain similar to those seen last year.

The lack of finance will still be the biggest barrier to house purchase and first time buyers will find it particularly hard to secure a mortgage from the major institutions as they continue to adhere to strict lending criteria. The abolition of the stamp duty holiday in Q2 will be an added burden for first timers, he added.

He also expects to see an increase in micro housing markets where demand in some areas creates a healthy market whilst less desirable areas get left behind. The demand for housing in the South East and London will increase during 2012 and this will push up prices in those areas. But, on the whole, he expects average house prices across the UK to remain reasonably unchanged this year.

Mr Bolton King finished off by saying that confidence would be a key factor this year and to some extent this would be driven by the media.

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