Home Loans
Mortgage Approvals Are Up, And House Price Inflation Slowing, But Analysts Predict A Serious Market
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By Andrew Regan
According to the Nationwide building society house prices cooled slightly in October; the trend over the past quarter demonstrated by the Halifax also shows a slow down in UK house prices from June through to August. However, Nationwide believes that the underlying trend “remains firm” with the interest rates failing to significantly curb demand. The levels of mortgage approvals however are at their highest point for two years, according to the Bank of England.
The latest figures from the Bank of England show that there were 126,000 mortgage approvals for home purchases made during September, a figure which exceeds most analysts’ expectations. The figure is up by 6,000 over the previous month and is an indication of the continued buoyancy of house buyers in the UK property market.
Despite the reports of this encouraging trend Fionnuala Earley, economist with Nationwide, sounded a slight note of caution stating that there were generally fewer estate agents reporting an increase in new buyer enquiries and in net sales during September. This indicates that many potential house buyers are experiencing some trepidation and this may lead to a slow down over the next few months. Ms Earley said: “While the relationship between these and house purchase approvals is far from perfect, it could suggest that we will see some slowing in approvals in the next few months.”
As property companies indicate a continued increase in the asking price of property for sale or rent, and economists predict that the current high level of mortgage approvals mean that house price inflation is unlikely to cool anytime soon, it is becoming progressively more difficult for many buyers to afford property. Jonathan Loynes, chief economist at Capital Economics commented:
House pr
ice inflation will continue at a high rate.” PricewaterhouseCoopers has produced a detailed analysis of the residential property market which shows that they believe that house prices are well above the long-term trend levels; the company warns that their figures indicate that there is more than a one in three chance of a serious collapse in the housing market in the next few years.
While most high street mortgage providers are continuing to lend up to between 3 and 3.5 times client salaries, others like Abbey have announced that they are going to increase their lending levels to 5 times client salaries in order to allow customers to cover the ever increasing house prices. This has lead to increased fears that some house buyers may be seriously over-extending their borrowing commitments.
Paul Hearnden, managing director of My Mortgage Direct, advises that “Just because a lender makes an attractive offer, it doesn
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