Housing market begins to cool

published 21 August 2014

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.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

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.

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.