24th March 2016
Mortgage approvals for home purchases jumped 20% year-on-year in February according to the latest statistics from the British Bankers Association (BBA).
The BBA also reported that gross mortgage lending was as high as £13.2bn after hitting £13.6bn in January, which had been the highest level since mid-2008.
The numbers from the organisation suggested that housing market activity was being elevated by buy-to-let investors and second home-buyers looking to make a purchase before April’s rise in Stamp Duty for the sectors.
Howard Archer, chief UK and European economist at IHS Global Insight believes the increased activity from buy-to-let and second home purchases ahead of April could exert limited upward pressure on house prices in the near term.
However post April, he expects buy-to-let interest may modestly dilute housing market activity and ease upward pressure on prices.
But limited supply has been providing support to house prices. Archer noted that while the latest RICS survey reported that new instructions rose for a third month running in February, after falling for 10 consecutive months, it was nevertheless a 13th successive month that demand growth had exceeded supply growth.
He said: “We expect house prices to rise by around 6% over 2016 amid reasonably healthy buyer interest, which could well be fuelled by markedly increased expectations that interest rates will not rise this year, and a relative shortage of properties.”
But a potential major downside risk to housing market activity and prices comes from the vote on European Union membership on 23 June.
“A vote for Brexit would be liable to see a marked hit to UK economic activity over the rest of this year and in 2017 amid heightened uncertainties, which would likely weigh down heavily on the housing market,” added Archer.