An interesting outlook analysis repot has revealed that the UK housing market could have plateaued, with lending and activity staying flat since the beginning of the year.
The report from UK Finance suggests that buyers and sellers alike are starting to tighten their belts- something that could become more acute if the economy deteriorates.
A number of Bank of England monetary policy committee members have recently voiced their opinions that interest rates should be raised. However, a rate increase does seem unlikely in the short-term at least.
The report explains: ‘The economic backdrop helps colour what has been happening in the housing markets, as the two are closely linked. The housing market has reached a plateau, as activity and lending have been flat since the start of the year. It is possible that we see a slowdown in activity if economic conditions become more challenging.’
UK Finance argues that the plateau is illustrated by property transactions averaging just over 100,000 per month for the last few months. A recent weakening in house purchase approvals could spell less transactions in the months ahead.
Buy-to-let has seen more volatility, unsurprising given the raft of tax changes introduced last year. Despite buy-to-let remortgage activity growing until recently, the last two months has seen this trend reversed.
Remortgaging has experienced growth amongst homeowners, driven by market share objectives. This had led to intense competition between lenders.
‘Despite all these moving parts, total lending in the mortgage space continued to be stable and was estimated to be £19.9 billion in June, on a seasonally adjusted basis. On an unadjusted basis, lending was £22.1 billion. Over the last 12 months, lending has averaged just over £20 billion a month.’
‘Home owner remortgage activity and first time buyers have driven lending for some time now. We expect this to continue, but perhaps not as strongly as has been the case of the last few years, as the factors supporting them are dampened by a challenging economic outlook,’ the report concludes.