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Home > Opinion > Kevin O'Donnell

Property market is key to consumer confidence

It is difficult to see a full scale recovery in financial services which is not accompanied by a recovery in the mortgage market.

By Kevin O Donnell | Published Dec 01, 2011 | Mortgages | comments

They say home is where the heart is but for most British consumers it remains a truism that home is where their wallet is, or at least much of their financial confidence in the future.

That confidence in their home – and property generally – has been rocked to the core in recent years but despite the ups and downs of the economy and general economic disgruntlement, consumer confidence in the UK, and many Western economies too, remains inextricably linked to property prices and consumers have not yet given up on property.

The fact is that if property values boom, consumers feel more confident and spend more and borrow more.

If the market declines, as it has done in recent years, there is little one can do to bring a smile to the face of the hapless homeowner who feels reluctant to splash out on a new three-piece suite or a long-term savings plan.

So why is all this important, you might ask? Well the fact is that economic recovery is unlikely in the UK without some pick-up in the property market and that is a very difficult number to predict. Indeed two respected recent reports have provided somewhat conflicting evidence on the state of the property market.

If the market declines there is little one can do to bring a smile to the face of the hapless homeowner reluctant to splash out on a long-term savings plan

According to The Royal Institution of Chartered Surveyors, interest in the UK housing market improved a tad in March, based on their most recent survey.

Rics reported that during March nearly 10 per cent more surveyors reported a rise in inquiries from potential buyers than those who reported a fall.

It said that the early spring sunshine encouraged some potential buyers to take a look at what was available, while others wanted to get in quick before a stamp duty holiday ended. Despite this 10 per cent more surveyors reported falling house prices in March.

E-surv’s Mortgage Monitor found that approvals for home purchases dropped to 43,450 in March, their lowest level since December 2010. It said there were 7 per cent fewer mortgage approvals for house purchase than in March last year.

First-time buyers were particularly cool on the market, said e-surv, and loans for purchase of the cheapest property, the sort of homes first-time buyers might buy, fell by 14 per cent in March to their lowest level for nearly a year and a half.

All of this makes disappointing reading, and the only positive comment I can make is that it is always darkest before the dawn. I’ve covered the mortgage market for many years and I find the current market the hardest to call in my memory.

Even so, there have been some positive indicators if you know where to look. For example, the number of mortgage products available is recovering strongly, property affordability is slowly but steadily improving and mortgage deals have rarely been so consistently attractive.

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