Mortgages Up but Still Subdued, UK House Prices Teetering on the Brink?

Mortgage approvals for house purchase rose again in March according to new data. The latest figures from the British Bankers Association say that 34,905 mortgages were approved for house purchase in March, up from 33,360 in February. This is an increase of almost 5%, but it is still well short of the 6 month average of 40,000 and even further short of the level necessary to sustain a healthy housing market.

What's worse is the rate at which supply is increasing is accelerating according to the UK's largest property portal Rightmove. In its April index of house asking prices the portal said that 25,000 properties have been coming onto the market every week for the last 2 months. That is over 108 thousand properties coming onto the market every month, against only 34,000 mortgages being improved.

The Rightmove index reveals another worrying trend: sellers are continuing to increase their asking prices. In April those adding their properties to Rightmove were doing so at an asking price 2.6% higher than those adding their properties in March.

I have pointed out the weaknesses of the Rightmove index many times, not least among them is the variance in properties being added, and their locations, but it is what it is and we have to accept it as some indication of asking prices, which continued to rise almost constantly throughout the crisis.

Supply shortages have been the main contributory factor behind the rises in UK house prices seen since last March. Before this the gap between sellers' and buyers' expectations in a buyers' market compounded the devastated mortgage market to cripple sales.

Now we have supply increasing and rising asking prices threatening to widen the gap between buyers' and sellers' expectations, which will already be a void compared to last March because of the price rises. Forgive me for repeating what I have said many times, but can we really believe we have seen the last of this housing market correction?

Like this post? Subscribe to our feed by RSS or Email, join our newsletter(s) or leave a comment using the form below.