National Mortgage Index June 2017

National Mortgage Index June 2017

Market Steady in May ahead of Election

With the snap Election called in April, May was always going to be a litmus test of the UK property market in terms of how consumers would react to yet more political upheaval. However, the positive news, as can now be evidenced by the data from last month, is that most factors remained steady with very little movement in terms of key indicators, meaning that the market was positively underpinned by the time the Election took place on June 8th.

Looking at data from last month, we can observe the following:

  • 1.1% increase in average purchase price, and correspondingly a 1.1% increase in typical purchase loan size
  • Minimal change in the average size of remortgage month on month, highlighted by a 0.2% decrease
  • Average purchase prices for First Time Buyers remained broadly unchanged on previous month with a 2.95% increase

Other key factors, such as the latest data from HMRC suggesting that Residential property transactions for May were up both month on month and year on year, all provide the new Housing and Planning Minister Alok Sharma with a solid foundation to work from, but with the formation of a confidence and supply arrangement with the DUP, when it comes to solving the housing crisis clearly what’s needed now is a true ‘cross-party committee approach’. The only way that any pragmatic solutions can be found is by taking the politics out of the situation and working with the industry to understand what is actually achievable and practical, bearing in mind that the companies who will be delivering upon these promises are in many cases, privately owned or listed and therefore, don’t have ‘registered charity’ on their letterhead.

But until such times as housing is seen as a Cabinet post, it will be nigh on impossible for any Housing Minister to really make a difference in terms of the major factors at play, namely lettings legislation in the private sector, social housing provision, new build volumes and the plethora of planning issues which prevent otherwise straightforward housing solutions being implemented. What isn’t within any Government’s control is how lenders approach legislation, and we’ve already seen how fundamental changes to the way that residential mortgages are policed, introduced in 2014 as a result of MMR and then latterly, changes to Buy To Let borrowing which have been introduced as a result of the PRA, have had an inevitable impact on the UK housing market, because at a basic level, if it’s more difficult to get a mortgage, less people will be able to get on or move up the housing ladder, regardless of how many new properties are built. And regardless of what any Government does, the Bank of England and financial services industry are, to a point, out of their control.

We’ve already seen what the Conservatives achieved by introducing tougher taxes on landlords, and increased levels of SDLT on second homes and Buy to Let properties, and we’ve only just begun to see the ripple effects this is causing – both good and bad – in terms of some landlords withdrawing from the market, a situation which is likely to increase once Buy-To-Let investors start to see the real impact on their personal tax bills. According to data released by the ONS this month, rents have increased on average across the country by 1.8%, which is an expected outcome of a lack of supply in many areas. However, First Time Buyers, who are seen as the lifeblood of the housing market, have largely benefitted due to fewer landlord buyers competing for the same properties as a result of the Government’s intervention.

Of course, we won’t know until September what the full impact of the Election has been on the housing market, as only then will we have data on transactions which were started from June 9th onwards. However what we can see is that the market was robust in May, which hopefully will ensure that both transaction levels and values remain steady in the months to come.”

To read more about June's NMI and see a clear breakdown by regions, please click here.