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House Prices ,Mortgage applications , interest rates house building update

British mortgage approvals declined in September for the first time in four months, but mortgage lending and consumer credit grew at the fastest rate in years, Bank of England data showed on Thursday.

The effective rate paid on households’ outstanding time deposits increased by 9bps to 1.59% in September and the rate for households’ new time deposits decreased by 2bps to 1.51%.

The effective rate on the stock of outstanding secured loans (mortgages) decreased by 2bps to 3.04% in September and the new secured loan rate was unchanged at 2.57%

The rate on outstanding unsecured personal loans decreased by 5bps to 6.84% in 
September and the new unsecured personal loan rate increased by 1bp to 6.98%. 

The credit card rate (all balances) increased to 10.53%, a 12bps increase on the month (see Table A for households’ effective rates).

The effective rate paid on private non-financial corporations’ (PNFCs) outstanding time deposits increased by 2bps to 0.67% in September, and the rate on PNFCs’ new time deposits increased by 1bp to 0.42%. The rate on PNFCs’ outstanding loans decreased by 2bps to 3.12% in September and the rate on new lending was unchanged at 2.63% (see Table B for PNFCs’ effective rates).
Table A: Effective interest rates paid/received on household balances by UK MFIs (excluding central bank) 

Mortgage approvals for house purchases numbered 68,874 in September, down from a recent of 70,664 in August. 

Reflecting strong past mortgage approvals and buoyant consumer morale, overall lending grew at the fastest rate since December 2008, powered by robust growth in both mortgage lending and consumer credit.

Mortgage lending rose 3.595 billion pounds on the month, the biggest net increase since April 2008, and amounting to annual growth of 2.2 percent  the biggest rise since January 2009.

Consumer credit also beat expectations on the month, and chalked up annual growth of 8.2 percent, the fastest increase since February 2006.

British economic growth slowed more than expected in the three months to September, and economists are unsure about the extent to which strong consumer demand will offset a weakening global outlook.

British house price growth picks up in October, Nationwide says :
A survey from mortgage lender Nationwide on Thursday showed house price growth rose 0.6 percent on the month, slightly more than expected.

Most housing market data has pointed to renewed momentum in house prices, after a hiatus in the latter part of 2014 due to tighter mortgage regulation.

Last month the BoE's Financial Policy Committee said it expected house price inflation to pick up in the coming months and would be closely monitoring Britain's so-called buy-to-let market, dominated by small landlords. click here 

British house price growth accelerated this month, according to a survey on Thursday, another sign of renewed momentum in the housing market.

Mortgage lender Nationwide said house prices rose 0.6 percent in October compared with a 0.5 percent increase in September. Economists polled by Reuters had expected 0.5 percent growth this month as well.

House prices rose 3.9 percent year-on-year, up from the 3.8 percent annual increase in September.

"We expect house prices to see solid increases over the coming months amid relatively decent activity and a shortage of properties," said Howard Archer, economist at IHS Global Insight.

Fixed rate mortgages remain most popular “Fixed rate mortgages have remained the most popular product type by a considerable margin in recent years. Data from the Council of Mortgage Lenders suggests that almost 90% of new mortgages were contracted on fixed rates over the past twelve months. This is probably a reflection of ongoing uncertainty about the precise timing of UK interest rate increases as well as a desire to lock in low interest rates. 

Will the market cope with higher interest rates?
As a result of the popularity of fixed rate mortgages in recent years the proportion of outstanding mortgages on variable interest rates has declined steadily, from almost
70% in mid-2012 to almost half in mid-2015. This should help to insulate many households from the impact of higher interest rates, though the proportion on variable rates is still higher than the 38% prevailing in 2007. It is also important to note that the majority of recent fixes are for relatively short
time periods – 65% were for two years and 30% for five
“Nevertheless, the housing market should be able to cope with higher interest rates in the year ahead, provided the increase is modest and the economy and the labour market
remain in good shape. Guidance from the Bank of England suggests that the increase in interest rates is likely to be gradual, and that they are expected to settle at a level
somewhat below the average prevailing before the financial crisis, which should help ensure borrowing costs remain

manageable.Robert Gardner,
Nationwide's Chief Economist

A National House Building Council report on Thursday showed registrations for new homes -- which take place before building starts -- edged down in the third quarter compared with a year ago. click here 

Nationwide said house prices had grown at an annual 3 to 4 percent over the past five months, which boded well for a sustainable increase in housing market activity.

"The housing market should be able to cope with higher interest rates in the year ahead, provided the increase is modest and the economy and the labour market remain in good shape," said Robert Gardner, an economist at Nationwide.

Further information and charts:

Further Reading 

NHBC reports buoyant new home market despite Q3 marginal reduction 

Land Registry's monthly Market Trend Data for residential property prices in England and Wales 

Residential sales Move up despite lack of property Stock RICS October report

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