Don’t get taken in by the positive "spin" you may have seen about the housing market recently.
Recent data shows mortgage lending for June is up by 17% on the previous month. But this isn’t a sign of a housing market recovery, and I’ll tell you why.
Lending is still a huge way below last year’s level - 48% to be precise. It’s currently still near historic lows. The boost has been due to seasonal factors - more people move home in the summer - rather than economic health. And the Council of Mortgage Lenders (CML) agrees with this last point.
Take a look at the chart below. It shows UK gross mortgage lending for the past year. You can clearly see the sharp drop from June 2008 levels.
Mortgage lending is a far way off from its healthy levels of 2008...
Source: Council of Mortgage Lenders
But the housing market remains fragile. House prices are still high compared to earnings, with the average property costing 4.2 times average earnings. And mass unemployment - currently at 2.4 million - will keep the pressure on the housing market for a while.
The combination of lower funding, fewer lenders and weak consumer demand will curb any ‘improvement’. Don’t hold your breath... we’re still a long way from a housing market recovery.
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