Banks's "refusal to lend" leads to house price decline

Banks’ refusal to lend to home buyers is causing the decline in the housing market, estate agents warn today.

The latest housing survey from the Royal Institution of Chartered Surveyors found that 18 per cent more estate agents expect house prices to fall rather than rise in the next three months.

It comes as Halifax reported yesterday that house prices would continue to see a “modest decline”. Average values dropped 1.4 per cent in April to £160,000, a drop of £40,000 since the beginning of the credit crisis in August 2007, it said.

Michael Newey, a spokesman for RICS, said: “Activity still remains subdued and it is difficult to see it picking up materially over the coming months.

“Although there are signs that some lenders may be reducing their grip on the purse strings, in particular with mortgages aimed at first time buyers, there is still a long way to go before lending levels increase enough to have any real impact. Economic uncertainty may also continue to weigh on sentiment for a while to come.”

The RICS survey found 21 per cent more estate agents reported prices falling rather than rising in April. However, this is an improvement as it is the best level since June last year.

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The average number of sales per agency is at the best level since December, reaching 1.18 sales a week during the three months to April.

Peter Mountain, a RICS member based in Lincolnshire, said: “A few sales are taking place but the lack of mortgage availability is strangling the market.”

Simon Hickling, a RICS member based in Norfolk, said: “Job fears, lack of disposal income and limited lending opportunities are all having a negative impact on potential purchasers.”

And Geoffrey Holden, a RICS member based in East Sussex, said: “There is a continuing shortage of mortgage funds. Lenders are extremely reluctant to provide funds, making purchases difficult.”