The post last-but-one on this blog was a sobering tale of the post-New Year property slump continuing into spring. Thankfully, this post will be much more upbeat. 

New figures from the Royal Institute of Chartered Surveyors (Rics) show that in March the number of people trying to sell their homes hit its highest level since May 2007, which were the golden days before the words credit crunch became so well known. 

We have discussed previously how the unusually cold weather and the reintroduction the old stamp duty threshold of £125,000, at the end of 2009, produced a slump in sales and lending at the start of the year.  

That led to a dip in prices in February, put at 0.1% 

Now, the Council of Mortgage Lenders (CML) says that the number of new mortgages given to home buyers in February was 12% higher than the previous month, at 35,000.  

In fact, the number of new home loans granted in February was not only higher than in January but 49% up on a year ago, when the market was at in its most depressed state.  

Rics said that in March new instructions from sellers had outstripped enquiries from would-be buyers for the third month in a row. Price increases were still more common than price falls across the UK, but the surveyors’ body predicted prices would stabilise in the next few months.  

This is because of the simple laws of supply and demand. With more people selling than buying there is a surplus on the market and the buyers have increased power to negotiate lower prices. 

This ties in with previous market trends. An apparent shortage of properties for sale was seen by most analysts as the main reason for the rise in house prices which started in spring 2009. Explaining things in the past is often economists’ forte while predicting things in the future proves much more difficult. And so it is with forecasts for the next few months. 

The UK is in a period of fiscal uncertainty at the moment because of the general election. Five more years of fiscal irresponsibility will be greeted with horror by the markets and the subsequent turbulence in the housing market is impossible to predict. 

On the other hand, the prospect of a firm hand being brought to bear, finally, on the UK finances would be greeted with jubilation and the property market should be given the first months of stable growth in three years.

New figures continue to show that on the back of the financial crisis and consequent recession, people in the UK are becoming more fiscally responsible.  

The Bank of England (BoE) has shown that UK homeowners increased the value of their stake in their properties by £22.3bn last year. The figures reflect both continued decisions by homeowners to pay off more of their mortgages, and lenders’ insistence that borrowers put down large deposits.

The trend towards equity injections started in the second quarter of 2009. In the preceding 10 years, homeowners had borrowed £327bn against the inflated value of their homes.

The long house price boom, which started in the late 1990s, turned people’s homes into the equivalent of a cheap credit card. Hundreds of thousands of home owners borrowed cash in the form of top-up mortgages.

They used it to fund credit card spending, to finance spending on high-price items including holidays, home extensions and cars, or simply to invest.  

At its peak in 2003, the process was adding nearly 9% a year to the post-tax income of the entire
UK population.

But under the impact of the credit crunch and the property slump, homeowners reversed that trend and they have now raised the equity in their properties by £36bn in 21 months. The value of the extra equity being added each quarter slowed down during 2009, as house prices started rising again gently.

In the first quarter of 2009, home owners’ equity increased by more than £7bn, but by the fourth quarter, this had risen by only another £4bn.  

In other mortgage news this week, the availability of mortgages continued to ease, according to figures from the financial information service Moneyfacts.

Even though there is a slight reduction in availability of mortgages, it is encouraging that the average rates are still on the decline. 

Figures from Moneyfacts show that he interest rate on the average two-year fixed-rate mortgage fell from 4.74% in March to 4.72% in April while the average five-year fixed-rate deal dropped from 5.92% in March to 5.87%.

The average two-year tracker-rate also went down from 3.65% in March to 3.58% in April.  

The percentage of deals requiring at least a 25% down payment also dropped again, from 57% a month ago to 56%.

The news that some fiscal responsibility is winning the day over profligate spending is excellent, both for the UK economy as a whole and for the financial health of individuals. However, the news on this front is far from uniformly good as spending on credit cards begins to grow again. The sooner more people learn this important lesson the better for us all.