Job Worries Affect Property Recovery

As well as the mortgage drought it is the fear that people have about losing their jobs which is badly affecting the property market in the UK.

With two million people unemployed –official figures always drag behind the reality – and three million certain by the end of the year – such concerns are understandable.

Home buying is at its lowest figure since 1975. Almost 50 per cent fewer mortgages were taken out in 2008 compared with 2007. Figures from the Council of Mortgage Lenders show that net lending plummeted from £108bn in 2007 to £39bn in 2008.

Other surveys show a lack of mortgages deterred 56 per cent of would be property buyers. There are now fewer lenders in the market and there are fewer mortgages. The diversity and range of mortgages available has also narrowed. Lenders who still remain generally demand that the applicant is a safe bet and able to put down a big deposit.

Another 40 per cent of putative property buyers are frightened that property prices will still continue to drop. But 58 per cent of people say job security is the major factor which stops them taking a mortgage. They are worried about being made redundant.

Estate agents report that demand for property has grown considerably since December but the above factors have acted as a serious brake on the market.

Interest rates have dropped severely – although a lot of the cuts have not been passed on by the lenders. Surveys indicate that peoples’ worries about paying off a mortgage are now less than before the Bank of England introduced its programme of swingeing cuts.

There is a body of opinion which says lowering interest rates anymore – many predict that they could go to zero – might further delay the resuscitation of the property market.

The arguments for this view are intriguing. Each time there is a cut in interest rates savers take a hit. Most savers are getting little or nothing in interest on their accounts. In simple terms this means lenders have less money coming in and thus they have less to lend out.

In truth this is far from a simple premise and is something of a technical perception which tends to excite City types and economists. For millions of people who are trying to get a mortgage and are already angered by bankers and bonuses and fat profits which are still being made by some lenders it is an argument more likely to enrage than assuage.