Gross mortgage lending may grow to more than £200bn a year by 2015 for the first time since 2008, according to the Council of Mortgage Lenders (CML). Crucially though, the CML reckons that there is currently little evidence of a housing boom developing because the stretched nature of household finances and the prospect that at some time interest rates will rise will act as a natural constraint, and housing activity may well ease back of its own accord.
Additionally, the CML suggested that too much importance has been attached to the government’s Help to Buy mortgage guarantee scheme, mainly because despite more than 5,000 properties being bought in the first six months of the scheme, this is a fraction of the more than half a million transactions completed over the same period.
The CML added that household incomes have been under pressure as the cost of living has significantly outpaced the limited growth in nominal incomes. What’s more, there is further evidence of affordability pressures, notably among first-time buyers where the average multiple (of incomes as a ratio of new mortgages) has steadily risen across the southern part of the UK, and in the case of London and the South East has already exceeded previous peaks.
Interestingly, the Royal Institution of Chartered Surveyors (RICS) revealed in its latest survey that expectations of future house price growth exceeded a 14-year high in November, as the amount of homes coming onto the market once again fell well short of rapidly rising buyer demand. Around 59 per cent of chartered surveyors predict that prices will continue to rise rather than fall back over the next three months, the highest reading since 1999. And while some regions remain benign, it appears that regional markets on the whole are responding to the better economic background.
According to RICS, the major concern is the lack of both new and existing homes coming onto the market, stressing the fact that although house building is on the up, it is nowhere near enough to make up the shortfall that has built up in recent years.
