This article is from the source 'bbc' and was first published or seen on . It will not be checked again for changes.

You can find the current article at its original source at http://news.bbc.co.uk/go/rss/-/1/hi/business/8253017.stm

The article has changed 6 times. There is an RSS feed of changes available.

Version 2 Version 3
'False dawn' in UK housing market 'False dawn' in UK housing market
(about 1 hour later)
An economics forecasting group has said that the recent rise in UK house prices is a "false dawn". An economic forecasting group has warned that the recent rise in UK house prices is a "false dawn".
The Ernst & Young Item Club also says that property values will not return to their 2007 peak for at least another five years. The Ernst & Young Item Club says property values will not return to their 2007 peak for at least another five years.
It says "a small number of cash-rich buyers have supported prices". However the latest figures from mortgage lenders show a continued revival in lending to house buyers.
"The supply of these funds is limited, which means prices are likely to dip again in the first half of next year," said the body's Hetal Mehta. The number of loans granted for house purchase in July was 19% higher than in July last year.
Turn in the market?
The Council of Mortgage Lenders (CML), which published the figures, said they showed the "first material annual growth" since early 2007, which was just before the UK property market was hit by a sudden downturn due to the onset of the credit crunch.
There are still constraints affecting the lending industry's capacity to fund increased lending Paul Samter, CML
"It's tempting to call the turn in the mortgage market at this point, and there is certainly concrete evidence that lending for house purchase is increasing," said the CML's economist Paul Samter.
"But there are still constraints affecting the lending industry's capacity to fund increased lending, as well as less consumer motivation to remortgage for the time being."
The CML said the number of new mortgages granted to house buyers stood at 56,00 in July, up by 24% from June and 19% higher than a year ago.
But the ITEM club argued that the increased lending this year, and the accompanying price rises of UK property, was largely due to "a small number of cash-rich buyers".
"The supply of these funds is limited, which means prices are likely to dip again in the first half of next year," said the forecasters's economist Hetal Mehta.
Differing views
The Item Club is the latest commentator to argue that recent upturn in prices reflects an unusual position in the market that is unlikely to last.The Item Club is the latest commentator to argue that recent upturn in prices reflects an unusual position in the market that is unlikely to last.
It says points out that many homeowners are either trapped in negative equity or reluctant to sell for fear of having to absorb the losses of the past two years. It pointed out that many homeowners are either trapped in negative equity or reluctant to sell for fear of having to absorb the losses of the past two years.
'Tough lending criteria'
The sharp downturn in prices that started in 2007 seems to have come to an end this year, though whether or not prices are actually rising again is a matter of debate.The sharp downturn in prices that started in 2007 seems to have come to an end this year, though whether or not prices are actually rising again is a matter of debate.
The Nationwide building society has said that UK house prices are £7,000 higher than the start of the year, while its big rival lender the Halifax says prices are in fact roughly the same.The Nationwide building society has said that UK house prices are £7,000 higher than the start of the year, while its big rival lender the Halifax says prices are in fact roughly the same.
The ITEM Club argued that as 56% of homeowners have a mortgage, any sustained recovery would have to be underpinned by a recovery in mortgage lending.The ITEM Club argued that as 56% of homeowners have a mortgage, any sustained recovery would have to be underpinned by a recovery in mortgage lending.
However banks were still being restrictive about the amount of money they were lending. However, as the CML acknowledges, banks are still rationing the amount of money they are lending.
"The scarcity of mortgage supply and tough lending criteria is making it particularly difficult for first time buyers to enter the market," the Item Club said."The scarcity of mortgage supply and tough lending criteria is making it particularly difficult for first time buyers to enter the market," the Item Club said.
"Given that they typically purchase cheaper properties, this will have significant implications for those looking to trade up, clogging up the market and limiting the number of transactions taking place," it added "Given that they typically purchase cheaper properties, this will have significant implications for those looking to trade up, clogging up the market and limiting the number of transactions taking place," it added.
And it warned that the threat of unemployment was also likely to cause people to delay making big financial decisions, such as buying a house.