New data yesterday showed a weakening UK housing market that fewer people can afford as house prices fell last month and orders for mortgage repossessions rose to their highest level since 1993.
According to the latest FT/Acadametrics house price index, house prices in April fell 0.2 per cent while the March figure was revised downward to show a 0.2 per cent fall in the first back-to-back monthly reading of falling house prices since April 1995.
Meanwhile, court orders allowing mortgage lenders to repossess homes jumped 17 per cent in the first quarter of 2008 from a year earlier to 27,530 - a 15-year high. The figure also represented a rise of 7 per cent from the fourth quarter of 2007 and is a sign that a growing number of homeowners are having difficulty meeting payments.
The drop in prices shown by the FT/Acadametrics index, although more modest than those recorded by other surveys, lends further evidence to what is now widely expected to be a trend for 2008: falling housing values.
Peter Williams, chairman of Acadametrics, said the variation was simply a reflection of the fact that while other surveys are based on mortgage offers - which may not necessarily lead to a completed transaction - the FT index reflects completed purchases. It also includes transactions that did not require a mortgage.
Nevertheless, Mr Williams said all the surveys were now conclusively pointing toward a weakening housing market for 2008. "We are at different stages of the process," he said, explaining the contrast. "Where they are pointing is where we are going."
Mr Williams noted that mortgage lenders had tightened terms considerably to reduce the risk of lending to those who may not be able to repay in full. The number of new home mortgages with "special payment features" - loans where borrowers can reduce monthly payments at no penalty - has fallen by 76 per cent.
Mr Williams also noted that while prices were weaker overall, the value of those in London continued to rise last month. Year on year, house prices gained 4.1 per cent in April, the lowest rate since February 2006, and would have been 2.7 per cent without London.
Data on repossession orders, while an indication of what is likely to occur in 12-18 months' time, do not reflect the actual number of occupiers whose lender has taken control of their home. Nearly half of all repossession orders were suspended before they took effect as occupiers struck deals with their banks.
The Council of Mortgage Lenders sought to play down the significance of the data and noted government efforts to minimise the number who lose their homes.
The CML forecasts a repossession rate of 0.38 per cent (45,000 repossessions) in 2008. "While higher than last year, this is still very modest relative to the overall size of the UK mortgage market of 11.8m mortgages," the CML said. In 2007, actual repossessions were lower than the group had forecast.
Mortgage possession claims - the preliminary legal move towards repossession of a home - also jumped by 16 per cent to 36,588 in the first quarter of 2008 from a year earlier and is the highest number of such claims since 1992.
Details: www.ft.com/ indepthukhousing
