Mortgage lending continues to fall in October
Data released by the Bank of England (BOE) show that mortgage lending is continuing to fall and are now at levels of 12 months ago. Just under 60,000 new mortgages were approved in October which is the lowest seen since June 2013.
It would seem that the fizz in the property market has been gone as buyers find it harder to get a mortgage owing to the new rules introduced by the Bank of England. Measures making it harder to get a loan are having the desired affect of cooling the property market. October was the fourth month in a row that saw a drop in mortgage approvals and this looks set to continue unless the Bank make it little easier to get a loan.
It is not just the BOE that are responsible for the reduction in mortgage approvals. Buyers have seen rapid price rises over the last 12 months and are waiting to see if house prices will come down. There is already some evidence that prices are coming off a little but it is unlikely that this will continue with the spring market just around the corner.
The other reason mortgage lending has dropped off is wages growth has kept up with prices over the last couple of years, however this looks set to change as wages inflation now looks as though it could be recovering which will boost mortgage lending.
There are some signs that the high end of the property market in London has been affected by the reason drop in demand with some reports of asking prices being reduced. However house prices in London still appear to be very high with the average price of a home now standing at £602,000. This compares to a national average of £268,000. Young people are being forced out of London because house prices are so high
Many are selling 1 bedroomed flats and can afford to buy a detached house in the suburbs for the same price. The concern is that first time buyers in London are being priced out of the market but this has been a worry for some time. The government has recently announced it will be helping first time buyers under 40 a 20% discount on a new starter home but there will not be very many of these built in London.