House buyer interest at 2 year high as Bank rate drops

09 December 2008 / by Rebecca Sargent
New buyer enquiries in the housing market rose for the seventh consecutive month and turned positive for the first time since 2006 in November, research from the Royal Institution of Chartered Surveyors (RICS) has revealed.

According to RICS, the increase in house hunting "can be partly explained by the sharp cuts in the base rate delivered in the months up to and including November, coupled with the already significant adjustment in house prices."

The Bank of England chose to cut the base interest rate to just two per cent last week, which it is hoped, will stimulate the mortgage market and, as a result, the housing market.

However, despite this encouraging news, the number of house sales continued to fall in November. RICS members reported average completed house sales of 10.6 per surveyor, down from 10.9 three months ago.

And, as house sales continued to slump, so too did prices as the number of surveyors reporting falling rather than rising prices was 76.5 in November, a slight decrease from the previous level of 81 but still showing a fall in house prices.

Commenting, RICS member Philip Tweedie, said: "The reduction in interest rates has led to more enquiries but potential purchasers are finding it increasingly difficult to obtain finance/mortgages."

And, as RICS referred to current housing market conditions as "close to the loosest level since 1992," one optimistic RICS member, Richard Sayer said: "The Housing Market is okay overall.

"I feel December will be an okay month, although we have had many price reductions and the mortgage rates have come down so this could work in our favour. Looking forward to a good month."

Latest data from the Council of Mortgage Lenders (CML) indicates that Mr Sayer may be right to be optimistic as mortgage lending was up 14 per cent in October from September's numbers.

Nevertheless, CML director general Michael Coogan said, mortgage lenders are still affected by more than just the base rate, "Ultimately, the response of each lender – whether on commitments to follow base rate moves or to finance new business in the future – will depend on its access to, and the price of, its funding."

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