The first rise in the approval of mortgages in six months has led to a diverse range of predictions for the UK housing market. This is because approvals tend to be an effective predictor of trends in the sale of property.
The Bank of England released figures showing that 60,275 mortgages were approved by lenders in December, which is slightly more than the 58,956 in November, making it the first time there has been an increase since June 2014.
This has led some experts to argue that this may be the conclusion to a relative slowdown in the market, experienced towards the end of last year.
The chief UK and European economist for IHS Global Insight, Howard Archer stated: ìWe suspect that the weakening of housing market activity is now bottoming out and we see it picking up to a limited extent in 2015 from current levels.î
However, he also spoke of caution, echoing the more cynical tone of other analysts: ìThe fact that mortgage approvals continued to fall through to November-after lenders got to grips with the new mortgage regulations-pointed to a clear underlying moderation in housing market activity.î
He went on to state: ìSignificant restraint on house-buyer interest and prices is still expected to come from more stretched house prices to earning rations, tighter checking of prospective mortgage borrowers by lenders and the knowledge that interest rates will eventually start risingÖî
This effect would also be supplemented by the fact that a number of prospective buyers ìÖmay also be deterred from buying houses because they look pricey in a number of areas after recent sharp rises.î
The viewpoint adopted by those who are less optimistic about house sales in 2015 is further supported by the fact that the figures released for mortgage approvals last month were down 17% from the year before, in December 2013.
The monthly average for mortgage approvals in the first six months of 2014 reached 67,203, significantly more than the figures just released for December. In fact, the monthly average of even the second half of 2014, which witnessed the downward spiral, was still higher than the December figure, reaching 61,669.
Despite this, there are number of factors as to why there has been a slight rise. Firstly, the decrease in interest rate is buoying the demand for property.
The consultancy firm, Capital Economics, stated: ìIndeed data on mortgage ratesÖshowed that the effective rate on new loans dropped for the third consecutive month to just 3.0% in December, down from 3.2% in summer.î
They also reinforced the view that ìrising real earnings and the reform to stamp duty have boosted prospective buyersí purchasing power.î
On a related subject, the Help to Buy Scheme, started in April 2013 has significantly contributed to the sale of property in the UK. The government launched the strategy in order to aid those who did not have the financing to put down a sizeable deposit – it has subsequently supported the acquisition of 41,533 properties in England.
Furthermore, the Bank of England has revealed that consumer credit increased by £578 million in December, which is significantly less than the £1.2 billion predicted by some experts.
In addition, lending to non-financial corporations plummeted by almost £3.8 billion in December, with lending to small businesses exclusively, dropping by slightly over £1 billion.
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