Housing market reaches a plateau

 

According to the Council of Mortgage Lender’s (CML’s) latest market commentary report, gross lending increased to £22.1 billion in June, up 9% on May and 3% on June last year.

Other report highlights included:

  • Activity and lending flat since the start of the year
  • Reduced consumer expenditure, which may become more acute against a challenging economic outlook
  • Home-owner remortgage activity and first-time buyers supporting lending

THE ECONOMY

CML’s report states that the economy has slowed in the first half of 2017, with growth expected to track at half the rate of recent quarters. In the first three months of 2017 growth was 0.2%, and the three months to June is expected to be 0.3%.

Unemployment continues to remain low at 4.5%. Due to weak growth in wages at 1.8%, workers spending power is being eroded by inflation, with the Consumer Price Index at 2.6% in June.

The CML report continued to add that “A number of Bank of England monetary policy committee (MPC) members have recently voiced their opinions on raising interest rates. Despite this, a rate increase when they next meet in August seems unlikely as inflation is currently in line with the MPC’s expectations as set out in May’s Inflation Report.”

HOUSING

The economic backdrop has meant that the housing market has reached a plateau, with activity and lending flat since the start of the year.

Property transactions averaged 100,000 during recent months, however the recent weakening in house purchase approvals – a leading indicator of activity – could mean fewer transactions in the months ahead.

Henry Knight, Managing Director, Springtide Capital added: “The mortgage market has had a variable 2017 so far. Compared to late 2015 and early 2016 when all areas of transactions were growing, it’s clear that first-time buyers continue to drive house purchase activity. This is a trend that is likely to continue over the coming months and is the first time since 1996 that first-time buyers have exceeded movers. Although the under­lying market is healthy, uncertain economic and political conditions have resulted in an increasing number of borrowers tightening their budgets. Generally speaking, the latest data suggesting a lacklustre housing market and predictions that the Bank base rate could rise from its historic low of 0.25 per cent, gives us a good indication of how future transactions may develop in the second half of 2017.”

If you’d like advice on obtaining a mortgage, simply call Springtide Capital on 020 3040 4400 to book an appointment with an adviser.