Industry players call for more market liquidity and easier mortgage financing
ATTEMPTS to stimulate Britain's flagging property market by slashing interest rates have been dubbed futile by a leading industry lobby group, as mortgage lending fails to resurface.
On the slide: Data from the Royal Institution of Chartered Surveyors showed transaction volumes sinking to the lowest level since 1978The National Association of Estate Agents (NAEA) is instead calling for moves to encourage banks to lend again and boost transactions to improve liquidity.
Last week the Bank of England cut its benchmark interest rate half a point to 0.5 per cent, the latest in a series of cuts that have slashed the rate from 5 per cent in October 2008.
But NAEA vice-president Gary Smith said: 'Interest rates can go down to zero and I'm afraid it will make absolutely no difference. What is desperately needed now is more liquidity in the market and more mortgage lending.'
As banks still refuse to lend to prospective home buyers, the rate cuts have 'done nothing to improve fluidity in the housing market', despite assisting home owners by lowering mortgage payments.
'I am yet to be shown the impact that reducing rates has made,' Mr Smith said.
The statement comes as the Royal Institution of Chartered Surveyors (RICS) released data showing a continued slide in housing sales, with the number of transactions sinking to the lowest level since 1978.
The picture looks particularly bleak in London, where on average only six properties have been sold per estate agent in the past three months.
A lack of finance and weak economic conditions are hampering the ability of buyers to enter the market, said RICS spokesman Jeremy Leaf. 'Potential buyers continue to come through estate agency doors but without mortgage finance, transaction levels are likely to remain close to all-time lows.'
He urged government guarantees for first-time buyers seeking mortgages. 'Without further intervention the housing market will continue to stagnate,' he said.
According to RICS, buyer interest is actually increasing as asking prices drop and bargain-hunters emerge.
House prices have been sliding since last year, dropping 17.7 per cent in February from a year earlier, according to mortgage lender Halifax.
Prices fell 2.3 per cent in February from January and have dropped 19.7 per cent since August 2007. The average house in Britain is now worth £160,327 (S$342,503).
Pressure is growing on banks to reverse a virtual credit freeze and start offering home loans.
Most mortgages during the boom years were based on deposits of 10 per cent or less. Today, it is near-impossible to get a mortgage of more than 75 per cent of a house's value.
Meanwhile, the number of new homes being built in England in 2009-10 is expected to drop to the lowest level in almost 90 years, according to the National Housing Federation.
It predicts a 50 per cent fall from last year to just 70,000 new units, as developers shelve projects across the country.
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