Housing starts down

Shelter has described figures showing showing a drop in new homes started as shocking and worrying.

But the housing minister, Brandon Lewis, said the government had "got the country building again" and was "delivering the homes that hard-working people rightly deserve".

Shelter's concern arose from official housing statistics for England which showed the number of foundations laid down fell to 33,280 in the three months to June, a fall of 14% compared with the previous quarter.

The annual figure, comparing the latest 12 months to the year before, was 1% lower at 136,320.

However, the figures also show that the number of new homes actually completed over the latest 12 month period rose by 15% to 131,060.

The National Housing Federation, which represents housing associations, said the news was encouraging.

Before the election David Cameron predicted that we would be building 200,000 homes a year by 2017.

Housing market cooling

Leading banks say that the cooling of the property market has continued in recent weeks.

The number of mortgages approved for house buyers was down 16% in October compared with last year, at just over 37,000, according to the British Bankers Association.

High house prices and tougher rules on mortgage applications appear to be holding buyers back.

Matthew Pointon of Capital Economics commented that the figures reflect a "sharp slowdown in housing demand", though a flurry of cheaper mortgage deals could revive interest.

The Halifax predicted that overall growth in house prices would slip to between 3 and 5 per cent next year, after peaking at 10 per cent in July.

However, the number of house sales is still on the up according to data from HM Revenue & Customs, which takes into account purchases for cash as well as mortgages.

HMRC reported on Friday that there were 114,000 transactions in October, a rise from 102,000 in the same month last year.

Is Cable pre-historic?

Should we go back to limiting home buyers to borrowing 3 to 3.5 times their income, as Vince Cable suggested on BBC Radio this morning?

It's what he calls a "stable level" compared with the multiples of 5 times which some borrowers have been getting.

Here are some responses from the mortgage industry to show you the other side of the argument:

*"You would disappoint around half of first time buyers" because the average income multiple for first timers is 3.42 at the moment, so large numbers are having to borrow more than that.

*"He's pre-historic" because he's harking back to a time (in the late 1980s, early 1990s) when people had to budget for zig-zagging interest rates which could be 15%. You  don't have to do that now, although lenders are stress-testing household income for a jump to 7% rates.

*"It's nonsense", because the regulator, the FCA, has forced lenders to move away from strict income multiples, to detailed affordability checks. For some 5 times income is affordable, for others 3 times income is unaffordable.

*Cable doesn't appreciate that the market in London has already gone "off the boil".

Taxpayer in hock to First Time Buyers

Today's promise from the government that it will guarantee the mortgages of First Time Buyers raises the question : at what point would taxpayer money be lost?

By the way, remember this Mortgage Indemnity Guarantee, masterminded by the Home Builders Federation and the Council of Mortgage Lenders, will also be open to existing owners who want to move but can't afford more than a 5% deposit.

Here are the details, but in summary the...

Homebuyer can get a 95% mortgage on a new home, because...
Housebuilder guarantees 3.5% of the price,
Taxpayer guarantees 5.5%,
Buyer puts up a 5% deposit.

For there to be a call on the taxpayer guarantee, first there has to be a default.

Plenty of people carry on servicing their mortgages, even though the value of the home has fallen and put them in negative equity. If there is negative equity, the taxpayer is in danger, but doesn't have to stump up any cash.

Next, the deposit has to be eliminated - a 5% shortfall in the price.

Then, the builder's stake of 3.5%, before there is a call on the taxpayer.

So what you'd need, in theory, would be a default and drop in value of more than 8.5%.

Of course, if the price of one home falls, others will drop as well. So if one buyer defaults it's likely that many others will be in the same dire position. The cost for the taxpayer would multiply.

Valuers have been busy

Valuations are increasing, says one of the larger estate agents, Connells, a sign that activity is "picking up".

These days we look for any straw in the wind for an indication that the housing market might be reviving.

I'm not talking about house prices going up. First time buyers and homeowners trading up want them to stay low.

The key factor is the number of transactions, which are running at half the level of the pre-recession boom.

Generally speaking, when you get a mortgage, you have to have a valuation done. So the number of valuations is an indicator of sorts.

Connells says there was a 7% rise in March compared to a year ago, the fourth month in succession which has seen an increase.

And valuations for the first quarter of 2011 as a whole were up 24% in number on the previous 3 months.

Valuations for first time buyers rose by 21% in March. Buy-to-let was busy too.

A dose of caution is in order here. The total was still 30% down on March, 2008, when the financial crisis was already underway, and 51% down on March, 2007.

And getting a valuation is not the same as completing a purchase.

But it could be a start.

First Time Buyer numbers plummet in December

Anyone looking at the latest mortgage lending figures from the big banks and building societies will be shocked to see a 42% drop to 14,500, year-on-year, in the number of first time buyers being granted a mortgage in December.

First time buyers are seen as crucial to any housing revival.

There is an easy explanation for this sharp fall. December 2009 saw the end of a stamp duty holiday designed to rescue the housing market. So there was a rush of buyers trying to take advantage.

The stamp duty concession meant no stamp duty had to be paid on properties under £175,000. The threshold went back to £125,000 at the end of 2009.

However, first time buyer numbers are still on a downward trend. The total fell by 3% between November and December 2010, according to the Council for Mortgage Lenders. And it was lower for the year as a whole.

The trend will focus attention on next week's First Time Buyer Summit called by the housing minister, Grant Shapps. He has summoned housing and lending bodies to suggest better ways of bringing young buyers into the market.

Another factor which they are bound to look at is the rise in deposits which first time buyers are having to to pay.

The typical deposit has risen again, to 23% from 21%. Of course, this is for buyers who succeed in getting mortgage. Many others don't succeed or don't try because of the high level of deposits required by lenders.