Among all the wailing and gnashing of teeth around house price rises recently, it was interesting to see that today figures showed mortgage approvals have fallen to their lowest level in 11 months, no doubt due to the tougher mortgage regulations imposed by the Mortgage Market Review.
That’s right, the Mortgage Market Review that the FCA spent time on, consulting the industry and producing a sensible and well thought out package of changes that have been implemented pretty well by everyone, but have only now had a chance to filter through. Sometimes our politicians seem to forget this!
With approval rates falling to 61,707 down from 62,918, the Bank of England also pointed out that the effective interest rate on new mortgage loans increased 6 basis points to stand at 3.13% which is the highest level since August.
All this makes pretty interesting reading and when you add that Hometrack have reported that house prices rose at their slowest pace in 5 months in June, there is a view that the worm has turned in the housing market. Certainly agents seem to be reporting more stock on the market and a decrease in the number of potential buyers for each property, which is undoubtedly a good thing.
All of this does beg the question as to whether the Bank of England has allowed itself to get caught up in the political house price panic more than it should have, as it was always evident that pent up demand left over from the Financial Crises needed time to flush itself through the system. Could we therefore just be seeing the end of this build up and the return to a more natural market given the current economic landscape?
There is therefore an argument to suggest that last weeks FPC changes were not necessary at all, although on reflection they seem to have been put in place not to have any effect now, but to be seen to be doing something for the future. So, maybe Carney did realise this after all.
It will not of course stop those who want more drastic action from saying that they did not go far enough, but in a few months time, especially as we get closer to interest rate rises, we could even see questions arising around how we stimulate demand again!
All in all it is frustrating to see all this political posturing and interfering to dampen the demand side is not the answer. All of us in the industry want one thing; a fairly priced, dynamic housing market with a good supply of sensibly underwritten mortgage availability all leading to higher transaction levels, not higher prices.
The supply side is still where the issue is and I have yet to see a more convincing argument for any intervention other than to build more homes.