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More signs of house price moderation

More signs of house price moderation

Category: Mortgages

Updated: 04/04/2014
First Published: 04/04/2014

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 It is now over 6 months old so the content may be out of date.

Earlier this week a report from Nationwide found that house price growth has slowed in the last month, a sentiment which seems to have been confirmed by Halifax – their latest House Price Index revealed that house prices fell by 1.1% in March, despite posting a quarterly rise of 2.3%.

This is the third monthly decline in 15 months, and means the average price of a UK property has now fallen to £178,249. Prices are still 8.7% higher than they were in March 2013, however, but these monthly signs of moderation should be welcome news to those worrying about how they'll be able to get on – or move up – the housing ladder.

Further signs of market constraint were provided by the Bank of England, with its official figures finding that there were 70,309 mortgage approvals in February – a fall of 8% from January. This would perhaps account for the fall in average prices in March – fewer mortgages being approved would indicate fewer completions and perhaps a reduced level of sales and demand, which would, in turn, lead to a reduction in prices.

However, the Bank of England said that the drop in approvals doesn't necessarily indicate a downturn in the market as previous figures had been "erratically high", but it should still provide hope that the market could be returning to some form of normality with signs of a bubble being further away.

There's hope, too, that the levels of supply and demand could start to balance out to further constrain excessive price rises. Government figures show that the number of housing starts rose by 24% in 2013, and despite the number of completions showing a marginal 2% fall, it's anticipated that those 98,610 starts will soon be completed to add to the supply of homes for sale.

Not only that, but there are industry expectations that more homeowners will start to put their homes on the market too: "The recent strengthening in house price is increasing the amount of equity that many homeowners have in their home. This will potentially encourage and enable more owners to put their property on the market for sale over the coming year, therefore boosting supply and easing pressure on prices," said Stephen Noakes of Halifax.

Ideally, this all means that house prices shouldn't continue rising too excessively, although there's not expected to be a significant drop in demand any time soon. The latest credit conditions survey from the Bank of England shows that mortgage availability is continuing to rise with lenders being increasingly willing to lend and, happily for first-time buyers, there's a significant improvement in the availability of credit to borrowers seeking high loan-to-value mortgages too.

The combination of improved economic outlook, consumer confidence, the rise in employment and low interest rates all point to the level of demand keeping pace, with more people being given the chance to get on or move up the housing ladder. But, remember that these record low rates won't be around for much longer – the prospect of a rise to base rate in 2015 means mortgage rates are slowly edging up, so why not take advantage of them while you still can? Check out our pick of the best rates to secure your dream home for less, and make the most of prices easing for a while.

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