According to new figures published by property analyst Hometrack, there was a 0.2%rise in the overall value of property prices in the UK last month.

This should be good news for home-owners and buy to let landlords who have seen a poultry return on their investment in recent years. It may also signal a rise in the number of contractor mortgage applications, which have been down in the first quarter of this year, compared to 2009.

However, whilst the headline figure reported an overall increase of 0.2% in the UK, this was distorted by house price rises in London, which yielded more than a 0.5% uplift. In fact, according to Hometrack, not one region outside London posted increases above 0.2%.

The property analyst has suggested that this may point to a general slowdown in the market. Indeed, the number of completed property transactions was down, in like for like growth, compared to the previous month. More worryingly, for the second month in a row, sellers have received less than 95% of the asking price.

The property supply / demand ratio is also heading in the wrong direction. The growth at which new properties are being released to the market is now 4 times that of growth in buyer demand. What this means for contractor mortgages is anybody’s guess. It does however paint a rather grim view of the state of the property market as we head into the summer months.

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Image: its a long long road by Mr Malique

The Council of Mortgage Lenders revealed on Tuesday that mortgage lending increased by 12% in February.

A total of 35,000 mortgages were taken out during the month which is an increase of almost 50% on the same period last year.The number of completed mortgages for contractors rose broadly in line with this figure.

More than a third of these were first time buyer loans granted to people who could put down an average deposit of 25% of the property value. The average contractor mortgage was 3.1 times the household income. First time buyers also committed to repay their mortgage by an average 13.3% of their total household income. 22,600 loans were made to people moving home, an increase of 11%.

Interest rates are currently at an all time low and February saw no increase in the number of fixed rate contractor mortgages or tracker products sold. Remortgaging is also not as popular as in previous years although there was a 2% increase over January’s figure.

Despite the increases in mortgage lending, house prices dropped 0.1% between January and February. The average house price is now £204,359 which is an increase of 7.4% on February last year.

Countrywide estate agent believes that mortgage lending will increase in March as applications have risen by 112% since the same month last year. They say this is due to an increase on consumer confidence and a larger number of mortgage products.

Grainger, the Newcastle based housebuilder and landlord, reported a 42% increase in sales over the six month period to the end of March. During the period they bought property worth £43 million compared to £12 million for last year.

The CML expects the new stamp duty regulations to fuel the market over the coming months.

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Image: Subprime Crisis No Barrier to Affordable Housing by woodleywonderworks

The upcoming general election will dampen the housing market, and the demand for contractor mortgages, according to experts.

A spokesman from an independent estate agent said that many sellers are waiting for the housing market to improve before putting their home up for sale. But if you follow the economic law of supply and demand, people should be putting their house on the market now when demand is high and supply is low.

Three quarters of a million houses are currently on the market but February sales were less than 10% (74,000) of that figure. That’s half the peak level that was reached in mid 2007.

This low sales figure can in part be attributed to the lack of available credit. In February, contractor mortgage approvals fell to a 9 month low and only 47,094 home loans granted across the whole of the UK.

Experts believe that many potential buyers are waiting to see the outcome of the election before committing themselves to a house purchase. The worst result for the market would be a hung parliament as this would create instability in an already fragile sector.

The stamp duty exemption for first-time buyers could help boost sales and it is thought that the Bank of England may keep interest rates the same for the remainder of this year.

The UK needs more new housing as levels have fallen to their lowest point in over 60 years. But if we get a hung parliament, we will have a further period of uncertainty until another election is held.

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Image: Stand in the Rain by Alyssa L. Miller