Despite doom and gloom in the national press, recent mortgage lending figures paint a healthier picture. Barney McCarthy looks at the facts.

January is often portrayed as a bleak month and it’s no wonder. With harsh weather, a dire financial situation plaguing many people, not to mention bulging waistlines after the excess of the festive season, it is easy to see why it is renowned for being the most depressing month on the calendar. If you are trying to sell your property, your mood is likely to have been darkened further by recent reports of a house price crash or, at the very least, a flattening out in values.

But it is important to retain a balanced perspective on things. House prices may be reaching a plateau, but they are still at historically high levels. The phenomenal growth spurt of the last few years had to end some time and a slight cooling of the market needn’t represent the nightmare some have been envisaging in recent months.

Lies, damn lies and statistics

Halifax’s reported growth across all regions in 2007, revealing that UK house prices increased by 5.2% between the end of 2006 and the same period in 2007. Looking ahead, Halifax envisages a flat period for house prices with modest price growth continuing in certain areas such as southern England and Scotland. Martin Ellis, chief economist for Halifax, says sound economic fundamentals and lower interest rates will support house prices in 2008. “The UK economy is expected to deliver its 65th successive quarter of GDP growth during the year, extending the longest running period of unbroken growth on record. The Bank of England’s Monetary Policy Committee is likely to follow up December’s cut by reducing the Bank Rate at least twice in 2008.”

According to the Council of Mortgage Lenders (CML), 2007 was the strongest year ever for gross mortgage lending. It rose by 5% to an estimated £362bn, outstripping the CML’s October 2007 forecast of £360bn. This means that the amount being borrowed is at a record high and supports the Halifax’s claims that house prices have continued to rise.

Andrew Montlake, partner at independent mortgage broker Cobalt Capital, maintains a pragmatic attitude. “I agree with the CML that the outlook is more positive,” he says. “There is a very good chance of an interest rate cut in February and at least one more during 2008, which will incentivise borrowers and restore much needed confidence. At the same time, falling LIBOR and swap rate are bringing succour to the banks. We’re by no means out of the woods yet but I’m confident things will be a lot rosier by Spring.”

Research conducted by Your Mortgage shows that while most areas are expected to see slight price falls in 2008, the majority will recover and experience growth in 2009 and beyond. All regions are expected to have posted improved figures by 2012, although some rises are more modest than others. Average house prices in Walsall in the West Midlands for example are only expected to improve by 1.1% by 2012, while some areas in London could rise by over 30%. To see how house prices will change in your area over the next five years, visit our property price predictor.

As first-time buyer, falling prices may seem like manna from heaven, but it is worth bearing in mind that the credit crunch has led to lenders being more cautious with their criteria, so you may still not be able to borrow as much as you would like. The beginning of the year has traditionally been a quiet of time for buying and selling as people avoid the upheaval of all the paperwork and moving house over Christmas, plus the current market conditions would seem to suggest now may not be an opportune time given the expected lull.

But don’t let the harbingers of doom put you off for too long. It is important to put the present climate in context of the astronomical rises of the last few years and realise that the current calm may not be such a bad thing.