Market Update: Residential Property

Mortgage approvals declined for the third straight month in April to an eight-month low, while property prices in London were revealed to have jumped 17% in a year

Morningstar News Team 27 May, 2014 | 12:59PM
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UK mortgage approvals declined for the third straight month in April to an eight-month low, as lending for property purchases moderated, data from the British Bankers Association showed Tuesday. Mortgage approvals for house purchases fell to 42,173 in April from 45,045 in March.

Approvals were below the expected level of 45,100. The latest figure was the lowest since last August, when approvals totalled 39,597. Mortgage assistance schemes helped first-time buyers and housing chains generally through the late months of last year.

Since the turn of the year, approvals numbers have moderated. Howard Archer, chief UK economist at IHS Global Insight, said the data suggests that the introduction of new regulations under the Mortgage Market Review has at least temporarily taken some of the steam out of housing market activity.

David Newnes, director of Your Move said The Mortgage Market Review had only recently implemented more stringent borrowing conditions, alongside tighter stress-tests and affordability checks from lenders.

“Now we are also seeing banks such as Lloyds place their own limitations to regulate home loans. But there is no reason for this to dent the confidence emanating through the property market,” he added. 

In an interview with Sky News, Bank of England Governor Mark Carney said the housing market has "deep deep" problems and it represents the biggest risk to the economy.

Data today showed that the value of total mortgage approvals declined to £10.5 billion from £11.1 billion in the prior month. Nonetheless, new mortgage borrowing of £12.2 billion in April was the highest monthly total since August 2008, and were some 52% higher than a year ago and reflect increased activity within the housing market.

Last week the Office of National Statistics revealed the average UK house price increased by 8.0% in the year to March 2014, down from 9.2% in the year to February 2014. House prices in London have jumped by 17%, an increase that pushed average national prices higher.

Richard Sexton, director of e.surv chartered surveyors, said while the increase was significant, there was no need to for buyers to panic.

“Buying a home is still becoming pricier, but the pace of increase is beginning to simmer which is helping ease the pressure on new buyers,” he said. “London and the South East are clearly the exception rather than the rule, and removing them from the equation takes annual price rises to a more modest 4.7%.”

Sexton did add that the Government had a duty to build more houses in order to support first time buyers.

“It is vital that first-time buyers continue to be  supported, and that we do not allow them to be priced out of the market. In order to safeguard the supply situation, we simply need to build more homes,” he urged.


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