More evidence that the housing market is slowing has emerged with figures showing a dip in mortgage lending and a Bank of England report pointing to growing caution among potential homebuyers.
The reports echo recent surveys suggesting the market is losing steam as buyers became more reticent over the summer, with the prospect of an interest rate rise next year and signs the economy is cooling.
The Council of Mortgage Lenders (CML) said its latest figures added to evidence of a “plateau” for mortgage lending and housing market activity. Gross mortgage lending reached £17.8bn in September,it said, down 1% from August, though still 10% higher than in September 2012.
CML’s chief economist, Bob Pannell, said: “Uncertainty over when we will see the first increase in UK base rates is exacerbated by weaker growth prospects in several major economies, including the eurozone. Recent indicators and policy actions corroborate our view of a gentle easing in market conditions. There is growing evidence that mortgage lending activity, and the housing market, are sitting on a plateau.”
Financial markets had previously been betting on an interest rate rise from the current 0.5% record low in the early months of 2015, but weaker economic indicators and recent comments from Bank policymakers have prompted traders to reassess that view and push back expectations of a rise to the middle of next year or later.
The Bank’s latest trends in lending report, published on Monday, also signalled growing caution in the mortgage market. “In recent discussions, some major UK lenders noted that they were particularly uncertain about the pace of underlying demand for secured lending,” the report says.
But the Bank also said moves to tighten lending rules earlier in the year, the so-called mortgage market review, were having less impact on how many mortgages were approved. “In recent discussions, most of the major UK lenders reported that operational issues associated with the implementation of the mortgage market review had pushed down on approvals over the summer, but had now largely dissipated,” according to the trends in lending report.
Howard Archer, an economist at IHS Global Insight, said the latest figures echoed surveys pointing to a dip in buyer interest in the housing market. “Overall, the CML data and comments, and the Bank of England survey, do little to dilute belief that housing market activity has lost momentum compared to the early months of 2014,” he said. “However, there is the possibility that the markedly increased likelihood that the Bank of England will not lift interest rates before mid-2015 will provide a near-term lift to housing market activity and perhaps prices as well.”
