Mortgage demand in crash territory will 'subdue' house prices in 2015
01-07-2015
House prices: The Government has succeeded in knocking the froth off the top of the housing market, expert says
Lenders have been caught by surprise as demand fell for home loans used to buy a new house despite increased mortgage availability. Photo: Alamy
By Anna White, Property correspondent
British lenders have witnessed the sharpest fall in demand for mortgages since the last housing market crash, according to Bank of England figures.
Sentiment among UK lenders plummeted in the final three months of 2014 as the majority of respondents to the central bank's Credit Conditions Survey reported weakening demand for new home loans.
The index, which measures the opinion of mortgage lenders, showed sentiment at 11pc in the first quarter of the year, indicating a rise in volumes of people trying to secure a mortgage
It rose again in Q2 to 26.8pc before falling to -27.4pc for the period of July to September and then sliding further to -46.1pc in Q4 as the bulk of the group recorded a continuing fall in demand.
While Zoopla and Rightmove have seen record traffic over Christmas, as people peruse property on the market, industry commentators believe the combination of tighter credit conditions and political uncertainty around the general election has stifled the housing market.
"Signs of a slowdown in the housing market towards the end of last year have been confirmed with lenders reporting a significant drop in demand for mortgages for house purchases in the fourth quarter," said Mark Harris, chief executive of mortgage broker SPF Private Clients.
"The mortgage market review has resulted in tighter criteria and certain borrowers continue to be hit hard," he continued.
The Bank of England said demand for secured lending for house price purchases was reported to have decreased significantly, taking lenders, who expected a rise, by surprise.
There is a strong correlation between buyer demand and house price movement, meaning the Credit Conditions Survey could spell another slowdown in house price growth.
"While these figures [the Bank of England data] don't take into account the spike in activity following the Chancellor's stamp duty overhaul [which lightened the tax load for those buying homes worth less than £937,000] the fact that demand has slid further into negative territory shows a weakened housing market in 2015 and subdued house price growth," said Lucian Cook, head of residential research at Savills.
"We forecast 2pc house price growth for the UK this year but flat growth in London," he added.
The most recent house price index from Nationwide showed that annual house price growth is already "subdued".
Britain's largest lender reported that the annual growth rate from quarter three (July to September) to quarter four (October to December) dropped from 10.5pc to 8.3pc, with just 16pc of what Nationwide described as "sub regions" enjoying an acceleration in price inflation.
"There is still a curiosity in the market," said private buyer, Henry Pryor. "But the first half of 2015 is going to be very, very different [to what we have become used to over the last year]."
Over the next three months people will wait to see the outcome of the general election, he continued, and it will take until the second quarter for people to work out whether the outcome affects the availability and cost of credit, he said.
However, these figures from the Bank of England come as the Halifax announced that the number of first-time buyers is at its highest since 2007, thanks to the return of 90pc mortgages.