News Column

Drop in lending at Nationwide

August 19, 2014

By James Salmon, Daily Mail, London

Aug. 19--Nationwide has revealed a drop in mortgage lending, in the latest evidence the housing market is beginning to slow down.

Britain's biggest building society said it lent pounds sterling 5.8bn to homeowners in the three months to the end of June, compared with pounds sterling 6.4bn in the same period last year.

Nationwide boss Graham Beale in May became one of the first leading figures in the financial world to suggest the market in London was starting to cool.

Yesterday finance chief Mark Rennison said: 'The evidence has continued to build to support that. We do think we have seen a degree of cooling in recent months.'

But he added that it was likely to be a short-term dip.

'Whether as we get beyond the summer recess consumers return to the market is hard to call. But, whatever, it still looks likely to be a short-lived downturn.'

Tougher rules including stricter affordability tests for borrowers were introduced in April.

The new regime, dubbed the Mortgage Market Review has been criticised by some for going over the top, with households asked intrusive questions about their finances and how they spend their money.

Rennison said this has restricted mortgage lending, as implementing the new rules has taken up time and energy.

But the building society, which said it had more than doubled its profits from pounds sterling 105m to pounds sterling 253m and boosted deposits by pounds sterling 1.5bn to pounds sterling 132bnbetween April 5 and June 30, pointed out this is typically a relatively quiet period for lending as more people tend to go on holiday.

The comments come as figures published today showed house prices have been cut more sharply in the property 'summer sale'.

Property website Rightmove said the price tag for an average property fell in August by pounds sterling 7,758 or 2.9pc from July to pounds sterling 262,401.

This marked the biggest drop in asking prices in August for more than decade. Average prices dropped pounds sterling 34,391 or 6pc to pounds sterling 552,783 in London.

Sellers tend to drop their asking prices in the summer because potential buyers tend to be more thin on the ground in the holiday season.

Regulators also believe the housing market is set to slow, with the Bank of England predicting house price growth will halve by next spring.

In its August inflation report last week, the Bank said the monthly increase in property values will fall from its current level of 1pc to 0.5pc in the first three months of next year.

It cited a levelling out of demand and an increase in the supply of houses.

It lowered its forecast for the number of mortgage approvals for the final three months of the year to 75,000.

This is 10,000 less than it had predicted in May.

The cool-off would mean that house prices would increase by around 6pc across next year, compared with more than double digit annual growth for much of this year.

Bank of England governor Mark Carney has previously warned that the surging housing market, accompanied by rising household debt, is the biggest risk to the nation's economic recovery.

The boom has been fuelled by the strengthening economy and Government schemes such as Help to Buy.

But the inflation report said: 'There is more uncertainty about the path of the housing market than three months ago.'


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Source: Daily Mail (London, England)

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