What 2012 means for mortgages and the UK housing market

The last 12 months has not been very kind to the UK housing market, with prices typically rising at a painfully slow pace. Alongside this, the North/South divide continues to grow, millions are trapped in negative equity and the nation can barely afford to make repayments despite the low interest rates. 

To make matters worse, first time buyers are desperately clinging on to any flicker of relaxation in lending, which now means relying heavily on the government.

Will 2012 be any better? We can only hope.


The Intermediary Mortgage Lenders Association (IMLA) believes that the weak state of the UK economy could have a serious impact on the housing market over the next 12 months.

A poll conducted by the industry body for lenders found that many of their members predict inflation will fall by the end of 2012. The general view was that inflation would fall by an average of 2.79%, but this will have little difference on mortgage lending for 2012.
Experts predict that no more than £130 billion will be lent, which is down on the £138 billion for 2011.
Peter Williams, IMLA Executive Director, said; “The survey results may look negative but represent a realistic outlook for the year ahead and remind us that we are still in very challenging times for the economy. The mortgage market remains very limited which is why intermediaries can play such an important role to help inform consumers about the best products available and what is right for them.î

ìMatching lenders and products to consumers is crucial to ensure sustainable lending and improve the market. Council of Mortgage Lenders’ figures show that intermediaries accounted for nearly two thirds of sales; 64% of first-time buyer loans, 57% of remortgage loans and 52% of home mover loans, during the third quarter of 2011.”

However, the CML estimates that the gross mortgage-lending total will be around £133 billion for 2012, still down on 2011ís estimations.

The National Association of Estate Agents (NAEA) believes the UK housing market will see a gradual recovery over the next 12 months and that the gulf between the North and South will continue widen.

Peter Bolton-King, the NAEA Chief Executive, said; “What we will see in 2012 is a continued increase in ëmicro-markets’ across the country. Demand for property in some areas fuels a healthy market while other, less desirable areas, are in danger of being left behind. Even within the same town we see some types of property proving more popular than others.î

Mortgage approvals

The end of 2011 saw a surprise increase in the number of mortgage approvals.   Loan approvals for house purchases for November increased to the highest secondly monthly rise since December 2009. 

Official Bank of England figures show that 52,854 mortgage approvals were made in November compared to 52,786 in October. Whilst this glimmer of hope from the housing market may demonstrate signs of improvement for the New Year, industry experts believe this is not the case.

Speaking to the Telegraph, Samuel Tombs of Capital Economics said; ìWe fear that approvals for new house purchase might soon start to fall as banks further restrict the availability, and raise the price, of credit in response to the deterioration in wholesale funding markets.”

House prices

House prices edged up by an average of 1% for the whole of 2011, according to a Nationwide report. This can hardly be described as a strong performance for the UK housing market, yet despite all the economic gloom and doom, especially with the Euro-zone crisis ongoing, house prices were ësurprisingly resilient in 2011í, according to Nationwide’s Chief Economist, Robert Gardner.

This brings the typical price of a home to £163,822 in December.

First time buyers

First time buyers have had a tough time recently, yet things could brighten up under new government reforms. According to Halifax, first time buyer (FTB) affordability is at an eight year high! The average FTB deposit is down 15%, however, the number of first time buyers is at its lowest level since 1974. 

In a bid to stir up the housing market, the government has announced a wave of housing reforms which allow first time buyers the chance to get a 95% Loan-Value mortgage.

The lenders, as a result of government reforms, are finally offering relief for first time buyers who have struggled to match the demand for high deposits since the credit crunch. The condition is that 95% LTV is available to potential homeowners who are purchasing new builds.

Halifax claims the average deposit is £27,032 for the first 11 months of 2011. However, this is still significantly higher than the average £17,482 in 2007. The outlook for 2012 is no better.

If you are planning on owning your very first home this year, you havenít got long to avoid paying a large stamp duty rate.

With low interest rates and the easing up of lending, 2012 could be a good year for first time buyers. Yet you have until the end of March to buy a property up to the value of £250,000 without paying the stamp duty fee.


Remortgage loan approvals are at their lowest level since June 2011 and fell in October and November last year. Yet with the minimal Bank of England base rate at 0.5%, repayments on remortgaging would be relatively low for the time being.

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