National Mortgage Index October 2017

Divergent picture in September as London cools but other regions perform well

September saw a mixed outlook in the UK property market, with property prices and lending activity maintaining their trajectory from August in some more buoyant areas, yet cooling in others. Last months’ headline data showed very little change from the previous month, however it’s likely that the regions that are currently seeing significant changes are ‘picking up the slack’ from those where prices have decreased over the last month. We observed marginal monthly movements on key indicators, including:

• Average purchase price in September, 17 0.8%lower than August 17
• Average remortgage loan size decreased in September 17 to £175,968, a 0.3% drop on the previous month
• Average first time buyer purchase price remains broadly unchanged month on month at £208,865 in September 17

Mortgage Advice Bureau data is based upon mortgage applications, therefore this provides a reliable bellwether in terms of consumer activity.

Whilst some pockets of the UK, such as the West Midlands, Wales and East of England have seen significant rises both year on year and month on month, according to most recent reports from both Rightmove and RICS, growth in London seems to be slowing down, probably due to the increased levels of stock available together with new build completions, both of which are impacting on prices. The South East is seeing a similarly cooler picture, albeit to a lesser extent.

We continue to see that discretionary buyers are currently sitting out of the market, perhaps instead remortgaging to raise capital to improve rather than move. Investors remain cautious, with many Buy to Let landlords reducing their portfolios, due to the double whammy of increased taxation and tougher lending legislation, although we did see a slight ‘last minute dash’ for some landlords to refinance their properties ahead of the new Buy to Let lending rules introduced on 30th September.

The silver lining in this particular trend however is that in some areas, particularly London and the South East which have, up until now, been badly affected by a dearth of First Time Buyer-friendly properties, are now seeing more and more properties at entry level coming onto the market; an outcome that has enabled many of those who want to get onto the ladder in these particular areas to take advantage of competitively priced mortgage deals available and purchase in September.

Elsewhere in the UK, property price growth continues to be underpinned by shortages of stock, as documented in the most recent RICS report, a situation which is likely to continue for the foreseeable future, with the September House Price Index from the Halifax suggesting that annual house price growth is now at 4%, which is at the upper end of the expectations from leading industry bodies for 2017, who had forecast at the beginning of the year that annual house price growth would be between 2% and 4%.

It’s likely that against this mixed picture, the market will remain flat overall as we head towards the final quarter of the year, with the busier areas potentially rounding out any decline in activity from regions where demand is less evident.