Going Up?

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The rise in mortgage approvals indicates that the downward trend in the market is over, suggests Duncan Farmer.

The latest house price statistics from the Halifax, Britain’s biggest mortgage lender, show that the market appears to have bucked its downward trend and that prices and mortgage approvals are rising.

The headlines from its report suggest that on average prices across the UK rose 2.5 per cent over the year to September and by 1.8 per cent in the past three months. Mortgage approvals, which are a good indicator of the number of completed sales, rose to 66,440, which is not far off the five-year average of 66,550 and 2,000 above the previous 12-month average.

The mortgage market has been slow but steady over the past five years. Although it is far lower than the average of 110,000 a month seen between 2002 and 2007, but then there was dramatic volatility. Although the housing market is not currently having the exciting rises – and less exciting but equally dramatic falls – seen before and after the financial crash a decade ago, it does appear to be stable.

That stability is almost certainly thanks to the historically low interest rates borrowers have enjoyed over the past ten years. Those low rates may well be set to rise but Mark Carney, Governor of the Bank of England, has said that any rises will be slow and steady and most analysts do not expect the Bank’s monetary policy committee to raise rates until at least the middle of next year.

By then, of course, we will have a much clearer idea of the impact of Brexit on the economy. It could be that should we leave the EU without a deal and the economy suffers the committee could decide to cut rates rather than raise them.

In the meantime, anyone who is concerned about the medium-term direction of interest rates should take a look at best-buy mortgage tables. Skipton Building Society and Santander bank have five-year fixed-rate deals at less than 1.85 percent. By the time the deals expire in 2024 the shape of the economy and the direction of interest rates are anyone’s guess.


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