50s Are the New 40s
Support to housing market activity may help keep the sales market stable post-Brexit.
|Click to download as PDF|
Just like the rest of the economy, the effect of the referendum on household transactions has been less than anticipated. The latest data on transactions is for August and it shows that activity has been broadly stable after accounting for the seasonal pattern of home buying. Activity is however 6 per cent lower than in August 2015. That may still be reflecting a small part of the distortion in activity due to the spike in sales to beat the second home stamp duty surcharge in April.
But, data on mortgage approvals has weakened more recently which may signal a softening in sentiment that will feed into the number of deals that will actually complete. Mortgaged transactions only account for about two thirds of all transactions but they do lead final deal numbers by a couple of months.
Yet that’s not guaranteed. The Bank of England was expecting a significant drop in the average numbers of mortgage approvals and has been happily disappointed. That may in part be due to the fall in mortgage rates available since the summer.
Two and five-year fixed mortgage rates – which cover the majority of new mortgage lending – have been dropping since May. With the new monetary easing and particularly the Term Funding Scheme, the expectation is that mortgage rates may fall a little further over the coming months and that will help to support overall activity.
|Click to enlarge.|