As the UK economy moves into recovery, lots of property experts have been expecting the number of mortgages approved to increase. This expectation is due to rising wages, falling debts, and more people trying to move out of the rental sector. However, the British Bankers’ Association (BBA) has released data which confirms that the number of mortgages approved in September was actually the lowest since May. So what’s the cause of this fall, and what does it tell us about the state of the housing market in the UK more generally?
What are the facts?
Mortgage approvals for September in the UK fell to 44,489 in September, which is the lowest they have been in four months since May. However, compared to the figures for the same month of last year, the data for September shows an increase of 14%, which fits with the popular narrative that the UK property market, and the UK economy more generally, is in good health. This is also backed up by the fact that gross mortgage lending in August, the latest for which we have the data, was £12.1bn, demonstrating a 17% for the same month in 2014.
What is behind this fall?
The reasons for this uncharacteristic and unexpected fall are not certain; however, industry experts have been making predictions as to why this has occurred. Many people are in agreement that this fall in mortgage approval numbers is mainly due to the lack of houses available on the market in the UK right now. Howard Archer, the chief economist at IHS Global Insight has suggested that the market is being “constrained” by this lack of suitable properties.
What does this mean for the housing market in the UK?
The data we have from the British Bankers’ Association shows the UK housing market in a confused state. Although overall we are seeing a rise in the amount of mortgage lending, and the number of home owners more generally, it appears that the ability of the market to reach its growth potential is being constrained by the market itself. The housing stock in the UK has been reducing for some time, and this is understandingly having an affect on the market and those buying and selling properties.
How will this affect property buyers and sellers?
For property sellers, this is definitely good news. The reduced housing stock means that property prices have risen dramatically, and as a result sellers will be able to maximise their profits. What’s more, with wages rising and the economy in recovery, it is more likely that buyers will be able to fund these purchases. It’s clear that savvy sellers should be making the most of this, and looking to sell their properties as soon as possible. For buyers, however, it is a different story, as this means that they are now likely to pay more for properties than they would expect to, and prices are set to rise as suitable houses, particularly in urban areas, become scarcer.