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.
Budget measures may add a little to the feel good factor in the near term, but the Office for Budget Responsibility projections make it clear that a further period of fiscal retrenchment lies ahead.
Backward-looking indicators of housing activity and mortgage lending continue to describe subdued market conditions.
But improving prospects for earnings and last autumn’s stamp duty reforms seem likely to support a modest pick-up in activity over the coming months.
Market conditions for the next few months look favourable, given lower inflation, high real earnings growth and stamp duty reforms.
Supply and demand should become more balanced in 2015, leading to lower house price growth.
Political uncertainty in the UK will continue to weigh in on the second half of 2015, though its impact will likely vary by region.
There are early signs that housing market conditions are steadying after the slowdown in the second half of 2014.
Easier funding markets, the recent stamp duty reforms, and the “first round” effects of lower oil prices on UK inflation, should help stabilise activity levels over the coming months.
A more cautious view concerning the second half of 2015 is warranted for the time being, reflecting eurozone and UK political uncertainties.
Current activity in the housing market has eased with transactions back down to levels seen almost a year ago.
The FPC has turned its attention more towards the global economy as the UK housing market has softened in recent months.
The reform of the Stamp Duty Land Tax is likely to provide a modest short-term boost in activity over the next few months, with its impact fading in the medium-term.
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.
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