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Property prices slow down in July but mortgage lending rises.

It looks as if the recent boom in property prices may have slowed down. But mortgage lending in June rose by 6% despite fears that stricter rules on new lending might depress demand.

Recent house prices indexes indicate that prices generally have been almost static over the last two months with few areas now showing any significant increases.


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The Land Registry’s house price index for June, based on property purchases in England and Wales, shows there has been no overall increase in prices from May. The average  price of a home remains at just over £270,000.

Regional statistics show that only the West Midlands saw any marked increase, with a rise in average prices of 1.9% from May. Elsewhere prices rose little or even started to fall back – even in the London region as a whole there was little change.

This slowdown has been confirmed by the Nationwide. Their figures for July show a increase of just 0.1% across the whole of the UK, the slowest pace since April 2013.

Level of mortgage lending not affected by MMR rules

There had been concerns that the level of mortgage lending would be adversely affected by new measures following the Mortgage Market review (MMR.)  New FCA rules which came into effect earlier this year now require lenders to apply more stringent affordability tests to new borrowers.

However it seems that the rules have not had any impact on the overall volume of mortgage lending. According to Bank of England figures there has been a 6% increase in the amount of mortgage lending from May. Total gross lending in June was £17.9 billion, 20% up on June last year.

Loans to home-movers totalled 31,900, 4% up on the previous month and 11% on June last year. By value, lending to movers was £5.9 billion, 5% up on May and 23% up on June last year.

There has also been a substantial increase in the amount of lending to first-time buyers. 28,600 first-time buyer loans completed in June – 7% more than in May, and 19% up on June 2013. £4.2 billion was lent to first-time buyers in June – 11% up on May and 27% higher than June last year.

Signs indicate that housing market will remain strong

The Council of Mortgage Lenders, whose members handle around 95% of all residential mortgages in the UK, thinks that the market has not been greatly affected by the new rules. Their director-general Paul Smee said:

“For the second month running since new FCA rules took effect, lending characteristics remain similar to the market beforehand. We now feel confident that, as we would hope, the MMR effect is more gentle dampener than hard brake. As we recently suggested in our revised forecasts, lending levels should continue to increase modestly over the course of the year, driven mostly by house purchase but with remortgaging also recovering.”

The Nationwide is also moderately optimistic about the short-term future of the housing market. In his comments on the July figures Chief Economist Robert Gardner said:

“The modest rebound in mortgage approvals in June adds weight to the notion that the slowdown will prove temporary, though the underlying pace of demand remains unclear. With the labour market strengthening, mortgage rates expected to remain low and consumer confidence rising, activity is likely to recover in the months ahead.”

Now is a good time to sell as buyers benefit from Help to Buy

Lenders report more interest from first-time buyers. As the Help to Buy mortgage guarantee scheme now includes exisiting homes as well as new-builds first-time buyers may should be considering buying an older property, especially as the supply of homes is still lagging far behind demand.

This creates a good opportunity for owners who plan to sell but have been delaying putting their property on the market for the time being. Agents report that there is still a strong demand as growing confidence in the economy has led more people to consider buying rather than renting.

Mortgage finance is more readily available than it has been for some time. The various Help to Buy schemes are helping more people to get a foot on the housing ladder. So sellers now have a good prospect of finding a buyer and selling for a reasonable price.


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