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More action needed to support mortgage market

The main findings of the new report include:
* House prices will continue to fall but the pace of decline will slow;
* The main restriction on the housing market remains the lack of available finance for consumers. This is particularly restricting first-time buyer access to the market;
* The lack of funding has also decimated the sub-prime market, which is unlikely to recover in a serious way;
* Gross lending for 2009 of £145billion still looks achievable – with slightly more than half that figure being distributed via intermediaries, a slight increase on previous estimates.

AMI Director Robert Sinclair said: "There are some positive indicators, which will conflict with other negative news. This may indicate we are now reaching the bottom of the market. For example, buyer interest is on the increase. However, mortgage availability remains the key constraint on the market and we fear we are not over the worst.

"Those with good deposits or plenty of equity can access very competitive rates, but those who can’t are unable to take advantage of lower house prices. First-time buyers are the largest group affected. Prices have fallen so much they are offering first-time buyers a terrific opportunity to get on the housing ladder – if they can raise the money.

"We need to see further action from the Government to inject much needed finance into the mortgage market if we are to take advantage of the upturn in consumer interest and more positive outlook. We need either an extension of the Stamp Duty holiday or its abolition, together with an expansion of the Special Liquidity Scheme to more lenders."

Key highlights of the latest Economic Bulletin include:

Mortgage Market
* Housing equity withdrawal goes into sharp reverse as households seek to pay down debt;
* Mortgage approvals pick up from lows;
* Big balance sheet lenders will dominate the market – lenders relying on wholesale markets will continue to struggle;
* In specialist sectors, sub-prime is over as a major category, but buy-to-let and equity release should show long term growth.

Housing Market
* Prices to continue falling, but pace of decline should be slower;
* Activity levels beginning to improve, but will remain at very low levels;
* Transactions are much more important than prices;
* Mortgage availability is still a major constraint.

* UK’s recession set to be deeper and longer than most expected;
* Global responses to date have failed to tackle global imbalances;
* UK fiscal decline means no more room for tax giveaways;
* Unorthodox monetary policy must take the strain;
* Some optimistic signs emerging that contraction is slowing.

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