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Are there signs of housing market stabilisation?

Are there signs of housing market stabilisation?

Category: Mortgages

Updated: 20/05/2014
First Published: 20/05/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The threat of a housing bubble has been an ongoing concern over recent months, fuelled by steep price rises and a continuing imbalance between supply and demand. Well, it looks like things could be starting to even out, with several sets of figures pointing to signs of stabilisation in the housing market

First up, figures from Connells Survey & Valuation. They show that valuation numbers actually fell by 15% in April compared to March, after a previous monthly drop of 10% – bringing the total number of property valuations exactly the same as April 2013. Effectively, this means there's been annual growth of precisely zero, which should dampen some concerns of ever-rising prices.

Arguably, the drop in valuations activity is as a result of stricter affordability checks following the Mortgage Market Review (MMR). Although the rules were only officially implemented on 26 April, a lot of lenders adjusted their criteria in the months beforehand to give them time to adjust – and it seems to have had the expected impact, cooling the market and leading to a drop in activity.

Even though it's only thought to be a temporary correction – "Over the course of the year valuation levels will recover, leading to a healthier and more sustainable housing market overall," said Connells' John Bagshaw – it's still good news for those who might be struggling to find a home thanks to excessive demand, or for those worrying about rapid price rises.

In fact, even house price statistics don't paint too much of a worrying picture. Latest figures from the Office for National Statistics (ONS) show that house prices rose by 8% in the year to March 2014 – down from 9.2% in the year to February – while on a monthly basis they actually fell by 0.5% to stand at £252,000, marking the first month-on-month drop in over a year.

Plus, much of the annual increase was driven by the London market, which grew by 17% in the same 12 months. Excluding London and the South East, prices rose by a much more modest and perhaps even acceptable 4.7%, indicating that threats of excessive price rises aren't a concern for much of the country.

A further report, this time from Rightmove, echoed the ONS's findings. It showed that asking prices were up 8.9% year-on-year, but again this was largely driven by the London market which saw prices rise by an average of 16.3% – meaning prices excluding London rose by a much more moderate 4.9%.

Brian Murphy, head of lending at Mortgage Advice Bureau, commented on the findings: "It's welcome news that house price growth is slowing after some dizzying rises in recent months. Putting the capital and South East to one side leaves us with a far more measured and controlled upwards trend… There are signs that the upwards momentum in the housing market is cooling slightly.

"As for the mortgage market, with the new affordability rules keeping lenders under a tight rein, decisions to offer credit are being taken with clear heads and a full and honest appraisal of borrowers' finance."

The MMR could therefore continue to have a dampening effect which, overall, will lead to a much more sustainable and effective market in the future. It's good news for those worrying about being priced out of the market, and could potentially lead to a reduced level of demand too – if fewer borrowers can get the mortgages they want, demand will reduce – and that means supply and demand could start to balance out to curb excess price rises even further.

Time will tell what final impact this will all have on the market, but for those hoping to get on the ladder it could prove to be a great opportunity.

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