According to the website ‘Unbiased.co.uk’ the latest report for searches for mortgage advice for first-time buyers mortgages increased to 43% in July .

David Elms, chief executive of Unbiased.co.uk, said: “These July figures suggest that after a slight drop off last month, there is regained interest from first time buyers thinking of entering the market.  Many first time buyers who are in the process of scoping the market to see whether they are able to get on the property ladder are also seeking a whole of market mortgage adviser who can give whole of market advice and start to unravel the confusion of those looking to enter the market. 

“These figures also show that although searches on re-mortgage advice have dropped slightly in July, many still remain baffled by the mortgage maze and are continuing to seek whole of market mortgage advice to guide them on their options.  With mortgage deals continuing to change at a fast pace, only whole of market mortgage advisers can give you advice on all the options available as they can access products from across the range of mortgage providers.”

According to the Nationwide the price of a typical house rose for the fourth consecutive month in August, increasing by 1.6% on a seasonally adjusted basis.

The 3 month on 3 month rate of change – generally a smoother indicator of the near term trend – rose from 2.7% in July to 3.3% in August, the highest level since February 2007. At £160,224, the average price of a typical UK property is still slightly lower than 12 months ago. However, the annual rate of change rose further in August, from -6.2% to -2.7%. Over the first eight months of 2009, the seasonally adjusted index of house prices has risen by 3.2%, though relative to the October 2007 peak it is down by 14.4%.

Commenting on the figures Martin Gahbauer, Nationwide’s Chief Economist, said: “The exceptionally low level of interest rates offers some explanation for why house prices have not repeated the very sharp falls of 2008. There are two main channels through which the low level of interest rates has impacted the housing market. First, mortgage payments for existing homeowners – especially those with tracker or standard variable rate loans – have been reduced substantially.

Before the MPC began cutting rates, the average interest and principal payment per mortgage holder represented about 38% of the average post-tax labour income. Following the steep cuts in base rate, this has fallen to just 28% of post-tax income, despite historically high levels of outstanding mortgage debt. The fall in debt servicing costs has meant that fewer homeowners are under immediate financial pressure to sell than might have been expected in a recessionary economic background with rising unemployment. Partly as a result, fewer second-hand properties have come onto the market than is normally the case in recessions, which has contributed to moving the balance of supply and demand more in favour of sellers over the course of 2009.

“If the various monetary and fiscal stimulus measures that have been introduced over the last year are successful in reviving growth on a sustained basis, then inflationary pressures will eventually re-emerge and necessitate an increase in interest rates to more normal levels. When this happens, it will probably have the effect of releasing additional supply back onto the market and dampening the recent rise in buyer interest. Under such conditions, the strong price increases of recent months would become difficult to sustain. At the moment, a rise in interest rates is probably still some way off. However, the eventual exit from exceptionally loose monetary policy could make the recovery in the housing market bumpier than some might expect after the last few months of price increases.”

However, activity is still subdued on any historic comparison; this is the lowest July lending figure since 2001 and £11 billion lower than the July average over the previous seven years of £27 billion. 

Advances picked up in June and July, the increase is likely to have been driven mainly by a rise in house purchase activity, rather than remortgaging activity, as low reversion rates continue to limit the attraction of refinancing.

CML economist Paul Samter said: “Most of the indices point to house prices rising modestly over the summer months. The CML’s July gross lending estimate of £16 billion is the highest level in nine months and consistent with the rise in house purchase approvals.

“But the bounce-back in activity from the extreme weakness around the turn of the year, coinciding with a seasonal bounce, is limited in how far it can go against the current back-drop. We expect improved sentiment to support the market, but a further significant pick-up is unlikely with so many obstacles in place. As a result, we anticipate some seasonal slowing in lending volumes and housing transactions over the latter part of the year and the picture of a slow but more stable market to emerge.”

Andrew Montlake, director, independent mortgage broker Coreco, commented:- “These latest figures support the general feeling that some parts of the lending market are slowly easing, particularly in the large mortgage loan sector. This sector of the market does tend to start moving first before slowly trickling down to the rest of the market as lenders are happier to lend to what they see as “quality” applicants with higher incomes and sizeable deposits. However, there is still a big squeeze in terms of availability and competitive mortgage rates in the wider market despite buyer demand being strong.

“Recent falls in LIBOR and SWAP rates have not been passed onto consumers, and although it is not a given that if LIBOR falls then lenders interest rates must fall, lenders still appear to be more focused on balance sheet repair and profit building than actually lending.”

The amount of borrowers opting for fixed rate mortgages has hit record levels, with the products making up 70% of cases submitted by mortgage brokers in the second quarter of the year.

According to the latest Paragon Financial Advisor Confidence Tracker research, this is the highest level since the survey was launched in 1996. Fixed rate mortgages accounted for 55% in the first quarter of 2009 and 41% in the final quarter of 2008.

The proportion of Bank of England base rate tracker mortgages fell over the same period, from 41% to 26% of cases introduced between the first and second quarters of the year.

Paragon said this trend was as a result of lenders withdrawing or re-pricing tracker mortgages as the Bank of England slashed interest rates between December 2008 and March 2009.

Of the fixed rate mortgages, two-year terms remained the most popular, at 40%, three-year fixes 32%, five-year 24%, 10-year 2.5%. and one-year 1.5%.

John Heron, Paragon Mortgages managing director, said: “With borrowers unsure about the next move for interest rates, they appear to have been opting for the security of fixed rate deals. It is likely that the next move for base rates will be upwards, but it is unclear when that will be.

According to the latest Halifax House Price Index house prices rose by 1.1 % in July, and although they are still 12.1 per cent down on the same time last year, this is the second price rise in three months and the third this year.

Comparing the last three months with the previous three months house prices were 0.8% higher, and this slight increase was the first rise on a quarterly basis since October 2007.
The Halifax index found that despite the slight monthly increase last month, house prices in July were still 12.1 per cent lower on an annual basis.

Signs of a slight improvement in the market have been supported by Halifax’s house price to earnings ratio – a key affordability measure – which has declined from a peak of 5.84 in July 2007 to an estimated 4.36 in July 2009. The long-term average is 4.0.

The news comes as recent Bank of England figures showed that the number of mortgages approved to finance house purchase increased by 22 per cent between the first and second quarters of 2009.
In addition, mortgage approvals increased for the fifth successive month in June and were 35 per cent higher than in the same month in 2008. They were nonetheless still 58 per cent lower than in June 2007.

Also, demand for homes has risen, albeit from a very low base, since the start of the year, driven by improvements in affordability and low interest rates. Higher demand has combined with low levels of property available for sale to boost sales activity from exceptionally low levels and support prices over the past few months.

According to the Nationwide Building Society, house prices rose by 1.3% in July, the third month in a row that house prices have increased.

The month saw house prices rise by 1.3%, up from 1% in June, and annually the house price change reduced to -6.2%, up from -9.3% in June.

Commenting on the figures Martin Gahbauer, Nationwide’s chief economist, said: “The price of a typical house rose for the third consecutive month in July, increasing by 1.3% on a seasonally adjusted basis. The 3 month on 3 month rate of change – generally a smoother indicator of the near term trend – rose from 1.0% in June to 2.6% in July, the highest level since February 2007. House prices are still 6.2% lower than 12 months ago, but this represents another sharp improvement from the 9.3% year-on-year decline in June.

“Even if prices were to remain unchanged for the rest of 2009, the year-on-year rate would continue to improve since prices were falling very sharply in the second half of last year. For the first seven months of 2009 as a whole, prices have risen by a cumulative 1.3%, suggesting there is now a reasonable chance that prices could end the year slightly higher than where they started. Only a few months ago, such an outcome would have appeared unthinkable.

“House prices have been remarkably resilient so far this year, despite a recessionary economic background with sharply rising unemployment. Although this outcome has come as a surprise, it is not inconsistent with other economic indicators and asset prices, which have also bounced back somewhat after very severe declines around the turn of the year. During turbulent economic times, it is not unusual for economic indicators and asset prices to overshoot in one direction and then experience a correction in the other. In the specific case of the housing market, the very sharp decline in transactions over the course of 2008 produced a fairly large pool of prospective purchasers who were ready and able to buy in principle, but did not want to do so in the very uncertain conditions prevailing when the banking crisis was at its peak last autumn. When it became clear that government interventions around the globe had stabilised the banking system and prevented a worst-case economic outcome, some of this pent-up demand re-entered the market, with the added assistance of very low interest rates. Although the resulting rise in transactions has not been that dramatic, it has been enough to produce an upward bounce in prices because it coincided with very low levels of supply on the market.

“The improvement in housing market conditions, however, does not mean that the positive price trends of recent months can be extrapolated into the future in a straight line. If prices continue to increase at the rate of the last three months, they would soon rise to levels that would be noticeably out of line with earnings, rents and other fundamental determinants of housing valuations. One should also not underestimate the impact over time of high unemployment, which has implications both for buyer confidence and the financial pressure on existing owners to sell. It is unlikely, therefore, that price increases can be sustained for long at the very strong rate observed over the last few months.”