Just when will the housing market recover?

Posted on 29 November 2012 by Simon

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A challenging question I’m often asked at the moment is, ”when will the housing market recover ?” It’s an interesting question, a very topical question and one without an easy answer.  Some interesting figures have just been published which would suggest that the much lauded Funding for Lending Scheme (FLS) may not be reaching its target market. If the plan was to try and stimulate the housing market by making it easier for lenders to lend at lower rates on the higher loan to values (LTV) then it’s doubtful it’s having the desired effect.

The new figures show that in May there was a total of 2,365 mortgage products available across the LTV spectrum, which crept up to 2,373 by the time FLS started in August and to date now stands at 2,781, an impressive 17% increase since FLS came in. So it’s congrats to FLS and job done then!

However, as usual the devil is in the detail, and it’s not as straight forward as it seems. When you start to look at specifics, you find that since FLS’s August inception there are only 6 more 95% mortgages, most of which are geographically restricted and many remain dependent on family investments being lodged with the lender.

While at 90% LTV, the picture is slightly more alarming, where the number of products available has actually dropped. In May there were 274 products, and these have actually reduced to 258, a fall of nearly 6%. Now compare this to the highly competitive 60% LTV arena, where all the high profile rate coverage is. In May there were 290 60% products on offer, and to date they have shot up to 424. That’s a massive 46% increase in what was already the most aggressively priced arena of the market.

So the revised question should be: Is a massive injection of funds and products into the lowest LTV sector of the housing market likely stimulate a sustained recovery? Answers on a postcard please................


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