Market Commentary is our monthly analysis on the UK mortgage markets, released on the same day as our gross advances press release. Below is a listing of our most recent commentarys.
Expectations of the first interest rate rise in the UK have moved to Q4 2015, after the Bank’s Inflation Report revealed MPC members see inflation remaining below target for the next few years.
While the housing market has cooled in recent months, mortgage lending continues to be underpinned by positive factors.
Expectations of UK base rates have been moving lower and later, amid developing gloom about growth prospects in some major economies and geo-political uncertainties, allied with weak inflationary conditions.
There is growing evidence that mortgage lending activity, and the housing market, are sitting on a plateau.
Recent Financial Policy Committee comments and actions suggest that its concerns about possible housing market developments may be abating a little.
We estimate that gross mortgage lending totalled £18.6 billion in August, as the seasonal strength of the housing market continued over the summer.
A gentle slowing of lending activity may now be in prospect, as a result of the continuing impact of tighter lending rules and a softening of the London market.
Economic conditions have strengthened but while the Bank of England has signalled an improved economic outlook since May, headwinds remain and the message about future rate rises being measured and gradual remains unchanged.
There has been some cooling in housing market activity and sentiment in recent months. Mortgage activity seems to have remained robust following the regulatory changes but the impact of these remains uncertain.
The macro-prudential interventions announced by the FPC in late June are finely calibrated and precautionary, but could nevertheless reinforce April’s Mortgage Market Review in tipping the UK towards a more conservative lending environment.
It is difficult to gauge the short-term direction for house purchase activity and mortgage lending more generally, given unknown regulatory impacts, regional differences and uncertainty as to when the first in a series of interest rate increases will take place.
Expectations of higher base rates have intensified, following Dr Mark Carney’s Mansion House speech.
Market indicators point to a slowdown in activity levels, in part associated with new mortgage rules, but it is unclear how lasting this will be.
The Financial Policy Committee may still announce modest interventions in the mortgage market, in order to guard against a build-up in personal debt levels, on 26 June.
The Bank of England has signalled that macro-prudential measures to limit the housing market upturn are likely in the near future, and possibly in the very near future.
This reflects a forward-looking judgement on the part of the Bank, designed to ensure that mortgage credit growth associated with the housing recovery of the next few years is sustainable.
Forthcoming measures will, in our estimation, be careful, calibrated, and proportionate, and designed to reinforce prudent affordability checks, rather than to apply the brakes to the housing market in a more dramatic fashion.
Alongside benign developments in the wider UK economy and the labour market, housing market sentiment continues to strengthen.
There are as yet no signs of significant market disruption, arising from the imminent application of new lending rules associated with the mortgage market review. While some mortgage lending indicators have eased back gently, this is from the very high levels of recent months.
The FPC continues to be vigilant to housing market developments, and to remind the market of its ability to act before problems to financial stability set in.
Housing market indicators have continued to be strong over recent months, once seasonal factors are taken into account.
First-time buyers have benefitted most from the government’s Help to Buy initiatives, with the more recent mortgage guarantee scheme now starting to push average loan-to-value levels higher.
The housing market got a further boost from this week’s Budget. This, together with benign developments in the economy more widely, should bolster short-term sentiment and activity.
Bank of England signals bank rate to stay at ½% for some while yet and a lid on interest rate rises for several years to come.
The strong pace of mortgage lending seen in the closing months of 2013 persists into January, with gross lending of £15.5 billion a third higher than a year ago.
Further evidence that Help to Buy is well-targeted, mostly helping first-time buyers living outside London and the south east.
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