Low mortgage deals spark 11 per cent leap in buyers - as house prices drop by almost 4 per cent

Published 27th Jun 2011

Interest rates at a record low have sparked a leap of 11 per cent in the number of buyers this month.

Estate agents said low mortgage deals and lower asking prices from sellers has made the housing market more attractive for people on the look-out for a new home.

Property experts Hometrack predict sales will carry on increasing this summer after seeing the highest number of sales in three months.

They also revealed house prices have dropped by 3.9 per cent in the past year and are set for further falls.

Prices fell by 0.1 per cent in June and have now dropped in 11 of the past 12 months.

They will fall by about 1 per cent in the second half of the year as more new homes come onto the market but demand remains subdued, causing the number of homes on estate agents' books to rise, it predicts.

The Bank of England has kept the base rate at a record low of 0.5 per cent for the 27th month despite rising inflation.

Some predictions suggest the rates could stay low until 2014 which will boost demand on the property market.

Recent analysis also showed that in May mortgage lending rose by 12 per cent.

A total of £11.3billion was advanced during the month, up from £10.1billion in April, and also 1 per cent higher than a year ago, according to the Council of Mortgage Lenders.

Hometrack research director Richard Donnell said: 'The second half of the year is set to see subdued demand keeping a further downward pressure on prices.

'While the balance between supply and demand is not significantly out of kilter, subdued demand and weak consumer confidence are set to keep headline prices under modest downward pressure over the months ahead.'

The improvement in activity in the housing market in June was also the result of a bounce-back after a slump in May when viewings were disrupted by bank holidays around Easter and the royal wedding.

Activity in the market varies in different parts of the country, with demand for homes in London remaining strong where the average time a property stays on the market is at just six weeks. But in Wales it takes an average of 14 weeks to find a buyer.

Michelle Slade, of price comparison website Moneyfacts, told the Daily Express: 'This combination of competitively priced mortgages and properties being advertised at more realistic levels has given a much needed boost to the property market.

'Not only that, but the longer base rate remains at 0.5 per cent the more likely home buyers and sellers could see mortgage rates fall further.'

Source: ' ThisIsMoney '

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