Mortgage market shows sign of strength, in the face of subdued sentiment
Average UK house prices fell by 0.2% in May, according to Nationwide, leaving annual growth at 0.8%. This is well below the levels of growth we saw this time last year, with annual growth to May 18 at 2.4%. Growth so far this year is in line with our annual house price forecast of +1.5% across 2019 as a whole.
This slow growth is accompanied by relatively weak market sentiment. The RICS survey May still reported a majority of surveyors seeing falling numbers of both new enquiries and instructions, although the number of surveyors reporting more new enquires has been rising. Transactions have continued their downward trend, echoing the subdued market that surveyors are reporting.
Last month saw reports of a notable rise in new mortgage approvals for April. This is backed by UK Finance data, which shows that April was unusually strong this year, with 8.6% more new mortgages than April last year. This represents a distinct jump in the seasonally adjusted numbers which had been largely flat for 18 months. It remains to be seen if this is a single strong month, or part of an ongoing trend. More critically, it shows that the mortgage market is continuing at its regular pace, and hasn’t been affected by the extended political uncertainty to the same degree as sentiment and transactions. This strength in mortgage approvals implies that the fall in transactions is due to more cash buyers staying out of the market, which is supported by examination of UK finance data. Mortgages look set to remain affordable, staying at their low rates for longer than expected. Oxford Economics is no longer expecting a base rate rise in 2019.