Housing Market to Remain Weak After Dismal Second Quarter Mortgage Data
Mortgage approvals are falling and overall lending has stalled according to the Bank of England. This will lead to a soft housing market for the next few months at least.
The central bank said mortgage approvals have fallen 5 per cent in June, while overall lending growth has eased 20 per cent off of projections which were forecasted. These figures simply suggest the housing market is running out of steam, even though strong house price rises occurred last year. Alan Clarke, economist at BNP Paribas said: "With fiscal tightening and thousands of public sector workers likely to lose their jobs, I don’t see this picture changing any time soon." The housing market had experienced a surge in 2009, after a slump in 2008, but the increase in prices was mainly due to the shortage of available properties on the market. Home prices have been on a downward spiral this year, while demand from buyers has seen a slow down. This is due to two reasons, unwillingness to take on debt and inability to obtain financing. Also, a gradual improvement in credit conditions seen earlier this year have abruptly stopped. Howard Archer, economist with IHS Global Insight said: "It is evident that the ongoing fall in bank lending to companies is being influenced significantly by low corporate demand for credit in addition to restricted supply." He added: "Nevertheless, the data does little to alleviate concerns that ongoing tight credit conditions remain a serious handicap to growth and it is a particular problem for smaller companies."