House prices on the rise as lending slows
HOUSE price growth cooled in February but remains elevated, while pre-election jitters may have caused a slowdown in mortgage borrowing.
House prices climbed by 7.2 per cent in the year to February, down from 8.4 per cent in the year to January, according to figures released yesterday by the Office for National Statistics.
Meanwhile, the Council for Mortgage Lenders (CML) reported a 16 per cent fall in the number of mortgages granted in February compared with the same month last year.
“As with January, seasonal factors have played their part in dampening house purchase lending activity in February. This typical seasonal trend may also be exacerbated by uncertainty ahead of the General Election,” said Paul Smee, director general of the CML.
Some experts voiced concerns surrounding affordability following the data.
“This growth in prices coupled with a fall in loan values means that many would-be borrowers on modest incomes may find it increasingly difficult to get onto the housing ladder,” said Brian Murphy, head of lending at Mortgage Advice Bureau.
Many believe the fundamental problem behind declining housing affordability is a lack of house building to meet demand.
“Ideally, house prices would grow at roughly the same rate as inflation, so that prices don’t rise faster than potential buyers can save a deposit,” said Stephen Smith, director at the Legal and General mortgage club.
“One way to achieve this goal is to build more houses, so that demand keeps pace with supply. Currently we need around 200,000 new homes to be built each year. Unless we can meet this target, prices will continue to rise rapidly, making it harder for many to get a foot on the ladder.”