House Purchase Mortgages Now Up on 2 Years Ago - Still I'm Saving My Champagne

Sorry to all my regular for it taking me this long to put pen to paper on the British Bankers Associations figures for lending in November, but it is Christmas.

After the Council of Mortgage Lenders said that mortgage lending fell 10% in November, the BBA said that the number of mortgages approved for house purchase in November this year was 44,125, which is 152.3% higher than last year, and 0.4% higher than 2 years ago -- the value of the loans was 200% higher than last year.

Even I cannot argue with the significance of this finding: it does indicate that demand for housing is growing to levels that could support the beginnings of a sustained recovery, and also that credit conditions are easing finally.

Yes, the housing market had already turned downwards in November 2007, with mortgage approvals in the 70,000's in the peak months. However, a rise year on year after 2 years of decline is simply logic, a figure higher than 2 years ago after a 28 month decline is, or certainly could be the first uptick of the recovery.

Did I just say that? Yes I did. I have been covering the rises in mortgage lending for house purchases for several months now, always managing to find an excuse to play it down. Last time it was the fact that the rise was only year on year as mentioned above -- now I am out of excuses.

However, I won't be breaking out the champagne yet; and not just because a full recovery in house prices won't make me raise a glass if it means we go back to how it was before -- boom and bust. No, my champagne will still be staying cool until 2011.

Unemployment is still dragging us all down. The rising number of people taking mortgages now are the dwindling numbers of people who are secure in their job, and who have or can raise a 10%-20%.

Without an improvement in the job market the number of people who can meet those two criteria will eventually start to get smaller and smaller and smaller. There is little chance of an improvement in the job market until 2011, and I believe downward pressure will increase sufficiently to start pushing prices down long before that.

You can't disregard the numbers of people rushing to buy now while interest rates are low and costs are lower (Stamp Duty holiday on props under £175k ends December 31st, at which point 1% will once again be levied on all properties over £125,000). This could be another factor in driving down demand and ultimately prices in the coming year.

Not to mention the wait and see attitude to come from the impending election and the tax changes announced by Mr Darling. All in all we will be lucky to escape further severe price drops in 2010, let alone rises.

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