Housing and mortgage markets cool in February

14th April 2015


House price rise slowed across the majority of the UK and mortgage lending fell in February, official figures reveal.

UK house prices increased by 7.2% in the year to February 2015, down from 8.4% in the year to January 2015, Office for National Statistics data shows.

House price annual inflation was 7.4% in England, 1.1% in Wales, 6.4% in Scotland and 14.2% in Northern Ireland.

Annual house price growth is showing signs of slowing across the majority of the UK. Price increases in England were driven by an annual increase in the East of 10.7% and in London of 9.4%.

Excluding London and the South East, UK house prices increased by 5.9% in the 12 months to February 2015.

In February 2015, prices paid by first-time buyers were 7.4% higher on average than in February 2014. For owner-occupiers (existing owners), prices increased by 7.2% for the same period.

Home-owner house purchase lending declined in February both compared to the previous month and February 2014. The number of loans advanced totalled 40,600, down 1% on January and 16% compared to the same month in 2014. These loans totalled £6.8bn, which was down 3% on January and 13% on February last year.

There were 18,700 loans advanced to first-time buyers – down 1% on January and 16% compared to February 2014. These loans by value were £2.7 billion, which was down 4% on January and 13% down on February last year.

Home movers were advanced 21,900 loans, a decline of 2% compared to January and 16% down year-on-year. These loans totalled in value £4.1bn – 2% down on January and 13% down compared to February 2014.

Remortgage lending decreased month-on-month with 21,500 loans advanced – down 16% on January and 14% down on February 2014. The value of these loans (£3.3 billion) also decreased month-on-month by 20% and was down 11% year-on-year compared to February 2014.

There were 15,900 buy-to-let loans in February – down 13% on the previous month but up 11% on the same period in 2014. These loans came to £2.2bn in value, down 12% compared to January but up 16% on February 2014.

Paul Smee, director general of the CML,  says: “As with January, seasonal factors have played their part in dampening house purchase lending activity in February. This typical seasonal trend may also be exacerbated by uncertainty ahead of the general election, but we still expect to see an upturn in the spring and summer months. Buy-to-let, in contrast, has shown year-on-year lending increases, due almost completely to remortgaging which is typically strong in the buy-to-let market.”

Stephen Smith, director of  Legal & General Mortgage Club and Housing, says: “House price growth has slowed since the end of 2014. Although it might not seem like it, this is actually good news for the housing market, as price rises that are too sharp can prevent people from getting on the property ladder.

“Ideally, house prices would grow at roughly the same rate as inflation, so that prices don’t rise faster than potential buyers can save a deposit. One way to achieve this goal is to build more houses, so that demand keeps pace with supply. Currently we need around 200,000 new homes to be built each year. Unless we can meet this target, prices will continue to rise rapidly, making it harder for many to get a foot on the ladder.”

Brian Murphy, head of lending at Mortgage Advice Bureau, adds: “Mortgage lending continued to slow in February, both in terms of the number of loans advanced and the total value of this lending. This is broadly in line with market expectations given the time of year, although uncertainty surrounding the outcome of the general election appears to have exacerbated this. However, the CML remains confident that lending will pick up as the year progresses.

“The fall in lending to first-time buyers has been broadly in line with general trends in the CML’s figures: however, it is of slightly more concern that the average first time buyers’ loan has fallen by 12.9% over the past 12 months, while the ONS’s latest  figures show a 7.2% increase in house prices over the same period. This growth in prices coupled with a fall in loan values means that many would-be borrowers on modest incomes may find it increasingly difficult to get onto the housing ladder.

“In light of this, the Conservative pledge of an extension to the Right to Buy scheme will undoubtedly come as good news to the 1.3 million families living in social housing. However, this is no fix-all solution to Britain’s long-term housing needs. The move will help social housing tenants to get on the housing ladder, but will do little to provide a much needed boost to UK housebuilding or ease the concerns of families looking to buy who are living in private rental accommodation.”

Leave a Reply

Your email address will not be published. Required fields are marked *