The monthly survey of the UK housing market by the Nationwide building society has shown that, while there is still movement, it is very subdued. Prices rose by just 0.3% in May, which still left them 1.2% lower than a year ago at an average of £167,208.

In the past six months prices have drifted up, by 0.6%.

Prices and sales reflect the lacklustre state of the economy. The UK economy returned to growth in the first three months of 2011, albeit modestly. Nevertheless, the similarly modest improvement in economic conditions has so far been insufficient to pull the housing market out of its torpor.

Earlier this week, figures from HM Revenue & Customs (HMRC) showed that sales have been stagnating. Only 66,000 homes were sold in April, which was 1,000 fewer than in March and also 6,000 fewer than in April last year.

Recent figures from the Council of Mortgage Lenders (CML) and the Bank of England on, respectively, total mortgage lending and mortgage approvals, showed no improvement from the current historically low levels of activity.

One factor weighing on the market has been the continued rationing of mortgage funds by lenders. This has been allied to an increasing wariness by would-be borrowers because of the subdued state of the economy and fears of higher unemployment.

An emerging factor for the continued doldrums in the UK housing market appears to be the broad divide between what sellers think they can get for their properties and what they do then go for.  

Average asking prices are now £239,000, according to the website Rightmove, and with the average selling price at £167,208 this means there has to be a very large ‘correction’ before a sale can be made. For many owners, dropping the price this much is simply impossible and the house is removed from the market instead.

Recent trends in consumer satisfaction and industrial output have suggested, albeit rather subtly, that the UK economy is on the mend. It seem that only strong economic growth matched with free flowing credit will return the UK housing market to health this side of 2012.

The scheme, much vaunted by the previous government, aimed at preventing people losing their homes in England during the infamous credit crunch proved to be below target but above budget, a report has concluded.

The Mortgage Rescue Scheme enabled not-for-profit housing associations to buy a stake or all of a home and allow the residents to continue living there by renting it back.

However, the National Audit Office (NAO) said it only helped 2,600 households avoid having their homes repossessed. The target was 6,000. In addition, the rescues were also supposed to cost a total of £205m, but actually cost more than £240m, the NAO found.

In all, the figures demonstrate that the scheme has helped fewer than half the number of households expected and each rescue has cost more than three times as much as expected, with overall costs sitting at £240m.

Political and economic analysts have been quick to point out that spending £35m more than planned yet not reaching all those in need does not represent value for money for taxpayers’ investment in the scheme.

The scheme was designed and implemented by the Labour government in 2008, following a surge in the number of homes being repossessed because people were unable to continue with mortgage payments.

The prospect of even worse economic conditions also prompted the introduction of the scheme, which was administered by local authorities and overseen by the Department for Communities and Local Government (DCLG).

The NAO has studied the success of the scheme in England, which was separate from schemes in Scotland, which had been running since 2003, and Wales.

It found that the DCLG “made the wrong call” when predicting how many people would choose to relinquish ownership of their home and rent it back from a housing association, compared with the numbers who would opt for shared ownership with the housing association.

Some 98.5% of those on the scheme chose to sell their home, whereas the original estimate was that only 15% of people on the scheme would do so.

The report said the DCLG did not have detailed, up-to-date information on its target group and whether they had sufficient equity to share ownership with a housing association.

The head of the NAO said that, “The department made assumptions about the level of demand for the Mortgage Rescue Scheme and made the wrong call. There was more need than expected for more expensive support and less for the relatively low-cost rescue option. Spending more than expected and delivering less means that the department has not provided value for money.”

One point of view is to look at this as a noble failure, one in which the government of the day set out to help people but became entangled in their own good intentions. Perhaps a more realistic point of view is to see this as precisely the type of poorly thought out scheme, funded lavishly with other people’s money, which brought the previous government to the edge of the fiscal precipice. Remember that the next time you hear the word ‘cuts’ being used pejoratively.