National Mortgage Index May 2018

Market remains consistent in April

“In overall lending terms, in April we observed plenty of purchase-led activity alongside significant numbers of homeowners deciding to remortgage, probably due to the news headlines suggesting that an interest rate rise in May was likely.

The Easter holiday at the beginning of the month coupled with un-seasonally late bursts of inclement weather appeared to impact buyer behaviour in some areas until the middle of the month with many estate agents reporting viewings postponed during the period. However, homebuyer borrowing activity remained strong all month overall, suggesting that consumer confidence was very much still in evidence. Completed transaction volumes as a whole were slightly tempered according to HMRC data, although deals finalising in April would be a reflection of those which probably would have originated in January, if not previously.

House price growth continues to perform within market expectations, with the Halifax reporting year on year average price increases at 2.2% and our data suggesting an average annual increase of 0.6%.

However, on a monthly basis, price movements vary between indices, which we would suggest highlights the volatility of data, and also the fact that all indices vary due to the point at which the data is captured. We have seen more evidence of a regionally divergent picture this month reflected in our data, which is collected at applications stage, and have observed that some major conurbations are faring far better than others. (See page 6 for further details).

Sentiment in terms of the twelve-month outlook appears to be more positive, with the latest RICS Residential Survey suggesting that 31% of surveyors believe that prices will be higher in a year’s time, with the strongest sentiment in Scotland and the North West, although expectations for London remain subdued.

Until the latest CPI Inflation figures were released on 18th April showing that the headline figure had dropped to 2.3% it appeared almost certain that an interest rate rise would be announced in early May. We believe the news agenda around a potential increase drove consumer sentiment around remortgaging activity earlier in the month, with 95.5% of those arranging borrowing on their existing home selecting a fixed rate product of some kind, a slight increase on 94.2% in April last year. (See page 3 for more information).

First Time Buyer activity remained consistent last month, although we did observe a slight average uplift in purchase price at the entry level of the market. However, this would potentially correlate with the ongoing lack of housing stock available, as reported by RICS in their April data, which naturally would place an upwards pressure on prices in sectors of high demand. (See page 5 for more information).

Overall, we’d suggest that buyer demand has remained consistent, with the ongoing lack of available properties still at near all-time record lows contributing in no small part to a market which appears to be turning slightly stagnant in some areas. That’s because in practical terms, few properties available to buy translates into less buyer choice, and those who want to purchase are taking longer to find what they are looking for. Of course, whilst this trend continues, although it may not be great news for estate agents who were relying on a seasonal ‘Spring surge’ to boost their income, it does at least suggest consumer confidence in property is still evident, which in the longer term is not the worst place for the UK property market to find itself in.”

Read the full National Mortgage Index report here