Housing market begins to cool

Britain's rampant housing market may finally be losing some steam.

The British housing market may finally be losing some steam. Asking prices in London this month saw their largest drop since December 2007, falling by 5.9%, according to property website Rightmove. Prices across the UK as a whole were down by 2.9% on the month.It was the third drop in London prices in a row.

Meanwhile, official figures showed that prices were up by 10.2% in June compared to last year but that was a little slower than May's 10.4% rise.

As for lending, in July gross mortgage lending hit its highest level since the summer of 2008, according to the Council of Mortgage Lenders. The number of loans advanced for house purchases (as opposed to remortgaging) was up by an annual 19% in the second quarter, with growth slowing a little from the 25% jump seen in the first.

What the commentators said

The market is always slower in the summer when people are on holiday. But it seems that recent price rises, increased talk of interest-rate rises, and stricter rules on mortgage lending are all "giving buyers pause for thought".

The tighter rules introduced under the Mortgage Market Review have tempered rather than "slammed the brakes" on mortgage lending, said Capital Economics. Mortgage approvals have resumed their upward trend after a few months of disruption.

The amount first-time buyers are borrowing in relation to their income has reached another record high. Lending increases are slowing to a more sustainable pace, but given strong economic and employment growth, the path of least resistance remains upward.

Most analysts seem to think that the irrational exuberance in the housing market will now be replaced by relative calm. But financial history suggests that bubbles tend to burst rather than gently deflate.

Housing markets overshoot, said Tim Worstall on Forbes.com. And if we are seeing the start of a turnaround, it will be in full swing by the time the election comes around in May much to the government's horror.

Recommended

Properties for sale for around £1m
Houses for sale

Properties for sale for around £1m

From a two-bedroom garden flat in Notting Hill, London, to a Grade II-listed medieval hall house in Dorking and a 17th century farmhouse in Nottingham…
22 Jan 2021
Lockdown hammers commercial landlord Hammerson
Property

Lockdown hammers commercial landlord Hammerson

Three quarters of the tenants of shopping-centre operator Hammerson have been forced to close during the lockdown.
21 Jan 2021
Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
It's not just the UK – we're seeing pandemic housing booms across the globe
Property

It's not just the UK – we're seeing pandemic housing booms across the globe

Soaring house prices aren’t just a UK thing, they’re a worldwide phenomenon. And it’s no coincidence – the underlying cause is much the same. John Ste…
18 Jan 2021

Most Popular

Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
Prepare for the end of the epic bubble in US stocks
US stockmarkets

Prepare for the end of the epic bubble in US stocks

US stocks are as expensive as they’ve ever been. How can you prepare your portfolio for a bubble bursting?
18 Jan 2021
The best investment trusts to buy for 2021
Investment trusts

The best investment trusts to buy for 2021

Sectors ranging from emerging markets to student accommodation look poised to do well this year, says David Stevenson, as he picks the best investment…
19 Jan 2021