Housing market slows despite low mortgage rates

Latest figures show UK house prices slowed in the year to August with annual growth of 5.2%.

That is unchanged from July, according to the latest house price index from the Office for National Statistics.

Separate figures from the Council of Mortgage Lenders, also published yesterday, showed that home loans activity dipped in August, falling 9.3% in July to 62,300. But it was still up a modest 1.5% year-on-year.

ONS figures put house price annual inflation at 5.6% in England, 0.8% in Wales, 2.9% in Northern Ireland and -0.9% in Scotland.

Annual house price increases in England were driven by an annual increase in the East (8.8%) and the South East (7.4%), as London slows.

Brian Murphy, head of lending at Mortgage Advice Bureau, said the dip in lending activity is typical for August summer period. “Overall the market is looking in far healthier shape than a year ago when house prices were rocketing and the mortgage market was still adjusting to new affordability rules.”

Murphy said house prices have been rising on a far more stable trajectory in the last few months, with no signs of dips and troughs.

“Annual growth of between 5% and 6% looks far more sensible than the double digit growth seen this time last year, although it doesn’t reduce the need for government to put housebuilding firmly at the top of its agenda.”

Stephen Smith, director, Legal & General Mortgage Club and Housing, said although the housing market is subdued a 5.2% annual increase is still a substantial climb.

“This relentless rise of house prices is bad news for the overall health of the market, as it can stop first-time buyers from stepping onto the property ladder. It also limits the amount of choice available to home movers.”

Shaun Church, director at broker Private Finance, said despite the slowdown in activity revealed by CML data lending should hit levels last seen in 2008.

"The swap rate outlook for the next 10 years is around 2%, which is a clear sign that markets do not expect a sharp interest hike in the foreseeable future.

“For borrowers, this means that low rates are here to be enjoyed for some time to come.”