There is an increasing amount of evidence within the property market to suggest that that it is ìstarting to moderateî, according to one of the countryís biggest building society.
According to Nationwideís latest figures, property prices increased by 0.7% in May this year, compared to the equivalent figure of 1.2% in April.
However, despite the monthly fall, the yearly rise in property prices was up to 11.1% from 10.9% the month before- representing the severest rise in seven years.
Nationwide have argued that the recent decline in price rises could be down to the introduction of the new mortgage lending criteria introduced on April 26th through the Mortgage Market Review, which has seen people have their income and expenditure thoroughly analysed by lenders in order to determine how much they can realistically afford to borrow- both at present and when rates rise.
They added that the flagship mortgage guarantee scheme introduced by the government and so frequently cited as having a primary role behind price rises has contributed very little to growth.
Nationwideís remarks came on the backdrop of the European Commission issuing a request to the UK to increase taxes on more expensive properties, construct more homes and make changes to the Help to Buy scheme.
The average house now costs £186,512 in the country Nationwide identified, representing the largest average since records begun to be undertaken back in 1991.
New mortgage lending criteria
“There has been tentative signs that activity in the housing market may be starting to moderate”, Nationwide chief
economist Robert Gardner said, with the number of mortgage approvals in April down 17% from January.
“It is too early to say whether nationally this is indicative of a cooling trend in the wider market,” he added.
Gardner also suggested that the recent fall in property prices could be down to the implementation of new mortgage lending criteria, which has made it harder for people without a high level of financial backing to attain larger sized mortgages.
However, he argued that rising demand from first time purchasers has been “playing an increasingly important role in the housing market”,
According to the building societies data, first time buyers in March “accounted for 48% of house purchase activity”.
Help to Buy
Nationwide also rejected the notion that the governmentís mortgage guarantee scheme, aimed at assisting first time buyers enter into the market, has played a large role in the soaring price rises across the country.
“The evidence suggests that higher-priced areas have been seeing the largest percentage increases in house prices, especially in London and the South East.
“But the majority of Help to Buy loans have been on transactions where the property values are below the national average,” Mr Gardner said.