Jeff Salway: Not much new year cheer in first-timer housing market

LAST year was one of steady recovery in the housing market, yet there is potential in the coming months for all of that to come crashing down. Mortgage market experts are looking ahead at the next 12 months and hoping the fragile recovery develops more substance, yet they do so with a degree of trepidation.

January is traditionally a quiet month in the housing market, yet the end of the stamp-duty holiday – the threshold above which it is payable reverted to 125,000 yesterday – ensures first-time buyer activity will be closely scrutinised.

The latest signs are not encouraging, with the National Association of Estate Agents recently reporting that first-timers accounted for only 19 per cent of buyers in November, compared with 43 per cent six months earlier. Approvals rose in November, so there is every chance that lending figures will remain solid this month, but as we approach a general election, we can anticipate a "wait-and-see" lull in activity.

What we will find out is how significant the stamp-duty stimulus was, because the obstacles facing first-time buyers have not lowered significantly.

A modest improvement in lending criteria in November and December failed to disguise the fact lenders – under pressure from onerous capital adequacy requirements – are some way from rediscovering their appetite for advancing affordable loans for buyers without significant deposits.

What may keep first-time buyer activity ticking over is further house price falls after several months of rising values (fuelled by a supply-demand imbalance that is now correcting itself). There is also the 5 billion of government funds with which Northern Rock is to increase its lending levels.

We also have the mortgage market review to consider, itself cause for uncertainty and which could result in measures further inhibiting first-time buyer numbers, such as stricter affordability assessments.

In a market this uncertain, it's unsurprising that few pundits are willing to issue optimistic forecasts. In short, it's set to be a case of 2009 all over again, with the promise of more buoyant activity in the second half of the year.

THE housing market may be in need of additional stimulus, but it is savers that are well overdue some positive outside intervention. The prospect of interest rates sticking at or around their current level for the entire year is a grim one, for pensioners in particular. Then consider the rate of inflation, forecast to reach about 3 per cent in the coming months before dropping again, and you have a nightmare scenario for millions of people for whom the income from savings is a financial lifeline.

The average easy-access account pays only 0.81 per cent, well below the 2.375 per cent required for real returns that outstrip the current consumer prices inflation level of 1.9 per cent. The only segment of the savings market in which rates have remained buoyant is fixed-rate bonds, and for those needing regular income, especially older pensioners loath to have their money tied up, they're as much use as a chocolate kettle.

The only bright spot is an increase in the Isa limit in April to 10,200, including 5,100 in cash, from which over-50s are already benefiting. That aside, however, any intentions the government may have of producing a savers' package in either the April Budget or last month's Pre-Budget Report – with tax relief on savings, for instance – were squeezed out by the desperate need to plug holes in the public purse.

For savers, the year ahead could make 2009 seem like a walk in the park, but whether it's using the annual tax-free Isa allowance or shopping around for the best savings rates, there are some steps savers can take to improve the situation a little.