The Bank of England, somewhat surprisingly, reported that mortgage approvals for house purchases rose to a nine-month high of 67,086 in October.
Mortgage approvals for house purchases have been locked in a 63,000-68,000 range for the past 2 years. Consequently, October’s rise to 67.086 does not materially change our perception that the housing market is still having a tough time. Caution over making house purchases may well be magnified over the next few months at least by heightened uncertainties over Brexit.
Consequently, we expect overall UK house price gains over 2019 to be limited to around 2% after a likely increase close to 1.5% in 2018.
If the UK leaves the EU in March without an approved Brexit deal, house prices could fall modestly in 2019.
Howard Archer, chief economic advisor to the EY ITEM Club, comments: “The Bank of England reported that mortgage approvals for house purchases rose to a nine-month high of 67,086 in October after dipping to 65,726 in September from 66,397 in August. Mortgage approvals have improved modestly overall from a 2018-low of 63,211 in March (which had also been the second lowest level after December 2017 since August 2016).
“At 67,086 in October, mortgage approvals look relatively sluggish. They are 17.2% below their long-term (1993-2018) average of 81,046.
“Mortgage approvals for house purchases have been locked in a 63,000-68,000 range for the past two years. Consequently, October’s rise to 67,086 does not materially change our perception that the housing market is still finding life tough in the face of still limited consumer purchasing power, fragile consumer confidence and wariness over higher interest rates. Brexit uncertainty may well also currently be having some dampening impact on housing market activity.
“This is also borne out by latest survey evidence from the Royal Institution of Chartered Surveyors (RICS). Their October survey reported that new buyer enquiries fell for a third successive month and at a faster rate. Transactions were also down for a third month running.”