Jeff Salway: Fundamentals for a sustainable housing recovery aren’t there

THERE has been more upbeat news about the housing market in the last ten days than in all of last year. Whether we should read anything into it is unclear, however.

House prices rose last month, according to the Nationwide, while new Bank of England figures show mortgage approvals at a 25-month high and the Council of Mortgage Lenders reported a 10 per cent increase in lending over January.

But, without being too deliberately pessimistic, the figures are largely artificial. House prices are being inflated by a disproportionate level of high-end sales, with demand for sought-after properties significantly greater than that for first-time buyer homes.

Prices are also being kept high by low interest rates and a shortage of housing stock, rather than genuine demand. With unemployment and earnings on a downward trend, the fundamentals for a sustainable housing market recovery just aren’t there.

Mortgage approvals have been boosted by a surge in demand from first-time buyers before stamp duty comes back into play for homes worth £125,000 to £250,000.

Even the Council of Mortgage Lenders has warned that the end of the stamp duty holiday on 24 March means “we are now likely to see an unhelpful bunching of activity prior to the concession’s expiry, followed by a dip”.

Those famously bearish analysts at Capital Economics also play down the suggestions of an improving outlook. They warn that with prices still high in relation to earnings, “a sustained recovery looks to be many years away”.

The coming months will tell us a lot about the prospects of some form of recovery. If, once the rush of first-time buyers seeking to avoid paying stamp duty has subsided activity levels fall during what’s supposed to be the busiest period of the year, Capital Economics is probably right in its downbeat assessment.

More readers have been in touch with complaints about Lloyds Banking Group’s policy regarding the separation of Bank of Scotland and Halifax – HBOS – products.

Last week I reported the problems experienced by parents who felt unfairly excluded from competitive child savings products offered by Halifax but not north of the Border by Bank of Scotland.

Now I’ve heard from more Bank of Scotland customers unhappy at what they view as an unnecessary exclusivity of products within the same group.

Lloyds argues that “Halifax and Bank of Scotland will have their own products and services which are available exclusively in their own branches”, meaning a product offered by each business will have different rates.

That’s fine, on the face of it. But what happens when HBOS customers in Scotland and reaching the end of their product terms are shifted into accounts with rates inferior to those offered south of the Border by the Halifax? Rightly or wrongly many people feel aggrieved by this, a sense exacerbated by a lack of communication from Bank of Scotland.

One loyal customer of 50 years’ standing expressed his frustration at being unable to roll forward a four-year fixed-rate HBOS Isa into a similar product. For while Halifax offers four and five-year fixed-rate terms, Bank of Scotland no longer does.

His branch, refusing to arrange for their long-standing customer to open a fixed-term Isa with the Halifax, merely told him to visit his local Halifax branch. Of which there are none in Scotland, of course. Eventually he got what he wanted online, but only after a pointlessly complex and protracted transfer of funds from one part of Lloyds Banking Group to another.

Another reader wanting to save a lump sum with Bank of Scotland took out a three-year fixed product only reluctantly after being told there were no longer terms available. Only when going online later that day did she find the account added to her existing mix of Bank of Scotland and Halifax products. She also discovered that Halifax had the product she needed.

It appears that Bank of Scotland customers are getting a raw deal, offered savings rates inferior to those available at the other half of HBOS, the brand with which many of them originally signed up.

Separation of products is not a problem in itself, unless it’s to the detriment of customers who are given no good explanation as to why they must settle for second best. And that’s what’s happening here.

As one reader put it, “given all the problems that incompetent bankers have caused the nation over the last four years, one might be forgiven for thinking that they would now be working their socks off trying to make amends and improve their image. Without customers they would have no business. They have a lot to learn”.

A popular sentiment right now, it would seem.