Here’s to an improving market

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After years spent in hibernation, 2013 is the year when the housing market finally woke up from its slumbers, had a stretch and sprang back into life.

It was the first year since the downturn that the number of UK house sales has passed the one million mark while the Office for National Statistics (ONS) has reported house prices reaching record high levels in August – only for this peak to be passed two months later in October.

The number of mortgages on the market for people to choose from has surged by around 40 per cent since the Funding for Lending Scheme, which has given lenders access to cheap finance on condition they pass on the benefits to borrowers, was launched in August 2012.

Crucial to getting chains going again, 2013 saw the return of a previously lesser-spotted beast – the first-time buyer.

The number of people taking their first step on to the housing ladder was at a six-year high in October, according to Council of Mortgage Lenders’ (CML) figures.

So if 2013 was the year that the housing market found its mojo again, what does 2014 hold?

Two developments could potentially have a calming effect.

One is that Funding for Lending is being redirected away from the mortgage market, which some experts believe could spell the beginning of the end of mortgage deals with ultra-low rates. The other is that strengthened mortgage rules are set to come in next April under the Mortgage Market Review (MMR) to make sure there is no return to irresponsible lending and that people can only take out loans that they can pay back.

However, lenders have been anticipating these rules for a long time and have been adjusting their criteria accordingly.

The Royal Institution of Chartered Surveyors (Rics) expects to see another strong increase in house prices, fuelled by a continued shortage of homes for buyers to choose from. It predicts an eight per cent rise across the next year, with all areas of the country seeing increases, ranging from 11 per cent in London to four per cent in Northern Ireland. Scotland and Wales are expected to see prices lift by around seven per cent.

Ed Stansfield, chief property economist at Capital Economics, said: “The big picture is that we’re going to see the housing market continue to improve, transactions will continue to rise and I suspect house prices will continue to rise. We’ve pencilled in a five per cent rise for the year.”

Mr Stansfield expects to see a marginal slowdown in the pace of price rises and believes the Bank of England is likely to “step up a verbal campaign to calm the market”.

He believes the continued state of stretched household finances generally will also act as a brake on house prices.

The CML also expects to see a further rise in activity, with £195 billion worth of mortgage loans predicted to be handed out in 2014, up from around £170 billion this year. But it has also pointed out that despite the flurry of activity, mortgage lending is still a “far cry” from the height of the boom.

Mortgage lending for 2013 was half the levels of 2007, when £363bn worth of loans were handed out.