Has the housing market reached a plateau ?


Mortgage lending reached £22.1 billion in June, up 9% on the previous month, but the challenging economic situation could dampen activity going forward.

Gross mortgage lending for the second three months of 2017 was an estimated £60.3 billion according to latest figures from the Council of Mortgage Lenders, which has been integrated into a new trade organisation known as UK Finance. Although this is a 3% increase on the first quarter of this year, UK Finance said that the housing market has now reached a “plateau”, with lending flat since the start of the year.

First-time buyers and those remortgaging have been the main drivers behind activity, but if the economic outlook deteriorates, the current period of “belt-tightening” on the part of consumers may become more severe.

Slowing economic growth

Although the jobs market continues to improve, economic growth is faltering and wage growth also remains slow at 1.8%. This, combined with high inflation, which stood at 2.6% in June, reduces consumers’ purchasing power.

UK Finance said that home mover numbers have been gradually falling in recent months, with the first-time buyer market the only area of the market which has shown consistent growth.

Mohammad Jamei, senior economist at UK Finance, said: “Looking ahead, housing market activity is likely to reflect economic conditions – a deterioration would likely dampen first-time buyer numbers and homeowners remortgaging – the factors that have supported lending recently.”

Low mortgage rate opportunities

Despite concerns about the economic outlook, however, homeowners and buyers continue to benefit from exceptionally low mortgage rates.

Those who are concerned that rates may rise in future should review their current mortgage and take advantage of low fixed rates while they are still available.

First-time buyers may also want to act sooner rather than later, after the latest Bank of England Credit Conditions Survey showed that sentiment amongst lenders is starting to move gradually away from higher loan-to-value lending.
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