The Bank of England’s mortgage lending data showed that the number of house purchase approvals fell by 3% month-on-month in October from 61,267 to 59,426.
Meanwhile data released by Scottish Friendly’s disposable income index showed that disposable income rose by 2.3% in the past three months. Londoners have seen the biggest rise in disposable income over the last three months but housing affordability is hitting there hardest.
With disposable incomes rising and the number of mortgage approvals falling, the assumption is that house prices are outstripping affordability.
However the Nationwide House Price Index showed a modest increase in house price growth in November of 0.3%, the third month in a row where house price growth slowed.
Independent financial advisor Andy Wilgoss said there appeared to be a disparity between the slowdown in the housing market in recent months and broader economic indicators which have mainly been positive this year.
He said: “This is a conundrum for the MPC (Mortgaging Processing Centre) on which path to follow in 2015 and beyond. Whilst overall mortgage lending appears to be contracting, intermediaries are still well placed to enjoy their slice of the cake as MMR (Mortgage Market Review) continues drive clients away from dealing with direct providers.”
He said that a period of house price stabilisation will be beneficial in the medium term to allow wages to increase and deposits to be accumulated.
“Much of the first time buyer activity over the last couple of years has been supported by the bank of mum and dad, which may now be tapering off although there could still be further FTB stimulus after April 2015 when the pension freedom reforms kicks in.”
Ray Boulger snr technical director at John Charcol said: “The rate of increase in house prices has been slowing down for the last few months and I expect it to continue slowing. For most people finding a deposit of at least 5% plus costs, such as stamp duty land tax, is a bigger constraint than affording the monthly payments, especially for those already making substantial monthly payments for their housing by way of rent, although for single income households affording the monthly payments will also often be a problem.”
Boulger said that on average house prices are now back to their autumn 2007 peak, pointing to the fact that there are large regional variations.
“Most mortgage rates now are much lower than in 2007, making monthly payments more affordable. However, as the 100%+ mortgages which were available then have disappeared. First-time-buyers or movers with little or no equity or savings, or access to family help will often struggle to find the deposit, and that problem of course only increases as property prices rise.”
