UK Housing Market Sees Seasonal Stir
The UK housing and mortgage market continues to show signs of healing, but borrowers have not seized the advantage of low interest rates, according to a report from the Council of Mortgage Lenders (CML). The housing market across the pond seems to mirror that in the states, increasingly as the financial crisis felt so keenly in the US housing market and broader economy becomes a global ailment. The turnover rate among UK home sales climbed from low levels at the start of the year, and the fall of housing prices leveled out from a sharp decline. According to the CML report, some indices climbed into positive territory for the first time since mid-2007 as estate agents expect prices to rise by the end of the year. But the first quarter economic growth estimates fell 2.4% quarter-on-quarter, the sharpest such drop in thirty years. The revised estimate severely contradicted earlier forecasts due to firms slashing inventory, but because of reduction limits, this will become a positive factor in the quarters ahead, according to the lending report. Overall mortgage lending volumes produced £12.3bn (US $20.23bn) for June, up from the previous month but still weak for the season. Lower remortgaging offset the slight uptick in activity as borrowers handcuffed by equity constraints find it difficult to refinance -- not unlike US borrowers finding themselves underwater after home prices declined. For the three months ending in May, unemployment in the UK climbed to 2.38m or 7.6% - the highest since January 1997, according to the CML report. Seasonal factors might explain the increase in housing market activity, which is weak by historical standards, the Council sees hope for the future. “While it seems likely that the difficult labour market conditions, negative equity, deposit constraints for first-time buyers and restricted funding for lenders will limit how much further activity will increase, the outlook is certainly brighter than a few months ago,” the report reads. This month, the European Commission proposed tighter risk assessments and higher capital reserves among UK banks in order restrict the risk on complex re-securitisations. Write to Jon Prior.