29th September 2015
Mortgage approvals for house purchases reached a 19-month high of 71,030 in August, Bank of England data shows.
This was up from 69,010 in July, 67,201 in June and 65,250 in May.
At 71,030 in August, mortgage approvals for house purchases were 20.4% above the 17-month low of 58,998 seen in November 2014.
Nevertheless, mortgage approvals remained below the monthly average of 83,026 seen during 1993-2015.
Howard Archer, chief UK and European economist at IHS Global Insight, forecasts that house prices will rise by 7% this year and by around 6% in 2016.
He says that housing market activity has been on the up recently and seems likely to remain firm, pointing to not just that latest Bank of England data, but also figures from the Royal Institution of Chartered Surveyors’ survey which shows that buyer enquiries rose for a fifth successive month in August.
Very low mortgage interest rates, strengthening earnings growth, high employment and elevated consumer confidence are all helping to support the housing market, he says.
The Stamp Duty reform last December means that an estimated that 98% of house buyers are now paying less tax,which is also encouraging activity, he notes, while the strength of the buy-to-let sector is underpinning prices.
Archer says: “Meanwhile, limited supply of houses is currently providing increasing support to house prices. The latest RICS survey reported that new instructions fell for a seventh successive month in August (albeit at a slightly reduced rate) with the result that average stocks per surveyor fell to a survey low.
“Nevertheless, the upside for housing market activity and prices is expected to be constrained by more stretched house prices to earnings ratios, tighter checking of prospective mortgage borrowers by lenders and the likelihood that interest rates will start rising gradually before too long.
“Indeed, mortgage lenders have already withdrawn some of their lowest rate mortgages. At least though, the Bank of England is stressing that interest rates will only rise gradually and to a limited extent.”
According to the Halifax, the house price to earnings ratio rose to a seven-and-a-half year high of 5.34 in August. This is well above the long-term (1983-2015) average of 4.12.