What’s ahead
June's strong lending figures point to a robust current market, says Howard Archer of Global Insight. 'This suggests that house prices may well spike higher in the near term at least,' he says, 'after showing some recent signs of losing momentum.
Archer predicts that the current shortage of properties in some areas may also boost prices. 'This is particularly true of London and the South East, which are currently showing the strongest increases in house prices by a significant margin. Indeed, most other areas are currently seeing much more limited house price rises.'
'We continue to believe that house prices will eventually settle down into an extended period of relatively modest rises, allowing for monthly fluctuations around this trend,' he concludes. 'Despite high employment and a modestly improving economy, we suspect that buyer activity will be increasingly squeezed over the coming months if house prices move up significantly, and that this in turn will cap prices.'
How high is too high?
Meanwhile, an audacious prediction from the Oxford Economic Forecast (OEF): a report says the average house price in the UK will rise by over 50 per cent in the next six years, to over £300,000. OEF claims that by the year 2012 the average house will cost the equivalent of nine and a half times the average annual salary.
However, Halifax economist Martin Ellis disputes this forecast: 'It is a big increase, and certainly higher than the increase we would be expecting over the next few years. I don't think it is a likely figure at all; I think it's far too high.'
A more settled housing market is likely in the next five years, he says.'
Mortgage lending up again
The number of mortgage approvals hit a high last month, taking home loan activity to its highest level so far this year. In its report on lending to consumer, the Bank of England said the number of mortgages approved but not yet granted rose to 120,000, substantially higher than the 116,000 average for the previous five months.
This follows a similar finding from the British Bankers' Association last week. Meanwhile, Home track said house prices were rising at their highest rate for nearly two years and a RICS survey showed a six-year high in the pace of house price rises.
Mis-selling costs lenders
The Financial Services Authority (FSA) last week revealed that the cost of claims related to the mis-selling of endowment mortgages has doubled to £2.2 billion in little over a year. This comes hot on the heels of news that Bradford & Bingley has set aside a further £89.4 million to cover potential endowment claims, in addition to the £75.8 million already booked by the bank since 2004.
Tim Moore of EndowmentClaims.com says, 'Far from commiserating with the likes of Bradford and Bingley that endowment payouts are eating into profits, it is my opinion that insurers are getting off lightly. The FSA estimates that around 2.2 million home owners could have a valid mis-selling claim, which adds up to a potentially staggering compensation sum.
Moore believes the insurance industry is using unfair tactics to keep further victims of mis-selling from claiming. 'The industry has propagated a campaign of confusion and misinformation to dissuade endowment mortgage holders from seeking rightful recompense for mis-sold policies. This includes implementing potentially flawed time bars that stop people pursuing a claim after a certain date.'