25th June 2015
The UK property market appears to be heating up once again as new figures show mortgage approvals jumped to a 14-month high in May.
The latest statistics from the British Bankers’ Association (BBA) highlighted that the number of loans given out for home purchases rose for the fifth consecutive month.
The BBA’s data showed that mortgage approvals for house purchases climbed to 42,530 in May from 42,020 in April, 39,158 in March and a 20-month low of 36,155 in December. Approvals retreated to the December low from 42,350 in June 2014 and a 76-month high of 49,629 in January last year.
In addition, the latest surveys have suggested prices are set to receive a further boost. Property site Rightmove believes the unexpected outcome of a majority government has released the brakes on buyer confidence and activity, and will exert some upwards price pressure in the coming month.
In addition, the latest Royal Institution of Chartered Surveyors (RICS) survey reported that new instructions fell for a fourth successive month in May.
Given the current backdrop, Howard Archer, chief UK and European economist, at research hub IHS Global Insight expects house prices to rise by 6% in 2015. He warned however that there is “an upside risk to this forecast” given the lack of properties coming on to the market.
He said: “We currently see house prices rising by around 5% in 2016. We suspect that housing market activity will continue to improve amid generally supportive fundamentals and reduced uncertainty following the general election. Meanwhile, a shortage of properties coming on to the market is currently exerting increasing upward pressure on house prices.”
But he added that 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 knowledge that interest rates will eventually start rising, albeit gradually”.