Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Friday, 31 October 2014

UK house prices +0.5% m/m (+9.0% y/y)

UK house prices continue in October...but momentum fading

The UK housing market continued to rise in October, up by 0.5 percent in the month and up by 9 percent over the past year.

However, momentum definitely appears to be fading as mortgage approvals decline. 


Positive indicators

On the plus side employment is rising and many of the economic indicators look strong enough.

Furthermore, mortgages are just so darned cheap. 

The average 2 year fixed rate in Britain for those with a 25 percent deposit is now an absurdly cheap 2.46 percent.

A massive 95 percent of lending to first time buyers in the UK is now on fixed rates.

We also recently saw the introduction of an unprecedented 0.99 percent fixed rate mortgage from HSBC. 

Despite this, around 60 percent of outstanding mortgages are on variable rates, but most borrowers are well placed to cope with likely hikes in 2015.

The Bank of England has admitted that interest rates will peak at lower levels in the cycle ahead as lower interest are the "new normal" (quote). 

London leads

This has largely been a London (and Home Counties) recovery, with not very much to write home about in the regions located away from London. London prices are 21 percent higher than one year ago.

However price action and transaction levels in most of the regions has remained very slow compared to the heady pre-crisis days when spiralling household debt pushed prices higher almost everywhere.

The good times of easy gains for most regional towns are probably in the past, I'd suggest.


Interestingly, Northern Ireland index has rebounded to 346.5 (index: 1993 = 100) after having collapsed by more than 50 percent from an impressively ridiculous bubble peak of 659.4.

People like to talk about bubbles in Australia, but in truth Australian dwelling prices over the past 10 years have been far from spectacular, increasingly only moderately ahead of incomes in most cases.