31st March 2014
After reaching their highest level in some six years in January, mortgage approvals eased back to a four-month low in February according to the latest numbers from the Bank of England writes Philip Scott.
The BoE has reported that homes loans fell to 70,309 in February down from 76,753 in the first month of the year but despite the fall, the sector looks far from losing momentum, as mortgage approvals were still up 33.8% year-on-year.
Experts say the very poor weather was most likely to blame for the drop.
Howard Archer, chief UK and European economist at IHS Insight says: “The strength of house prices is not yet a serious concern outside of London and housing market activity is still not unduly strong compared to long-term norms, so in many respects it is premature to talk of a housing market bubble. Nevertheless, the risk of a house price bubble developing is very real as there is substantial upward momentum in activity, while the strength in house prices is becoming more widespread.”
But with latest numbers and surveys consistently show markedly rising buyer interest and strengthening housing market activity, house prices look set to see further strong increases over the coming months – especially as a shortage of available properties is exerting further upward pressure on prices in a growing number of locations.
Archer expects house prices to increase by around 8% in 2014 with gains across the country.
He adds: “Furthermore, there is a genuine possibility that this could prove to be a conservative forecast. Consequently, policymakers need to keep a very close watch on how the housing market develops over the coming months and to be fully prepared to act. Once strong upward momentum has developed in the housing market, it can be hard to stop – especially if interest rates are unlikely to rise markedly.”