The Bank of England has downgraded its forecasts for both mortgage lending and the housing market. It now expects less lending for house purchase, and house price falls rather than rises.
It now says that there are likely to be average of 60,000 mortgage approvals for house purchase each month between the second and fourth quarters this year. In February, it expected a monthly average of 65,000.
The Bank has also revised down its expectations for house prices. It had expected growth of 0.25% per quarter. It now expects that house prices are likely to fall by 1.25% in the year to Q4.
It released its latest report after gathering views from estate agents.
It said: “Contacts of the Bank’s agents have reported that in some regions, such as southern England, an excess of supply of housing has led to a widening gap between asking and offered prices.”
The report also notes that the housing market has been weak since the referendum and that Brexit-related uncertainties have weighed on house prices, alongside “many other factors”.
It says that Brexit uncertainty is particularly important for “large, hard-to-reverse spending such as on housing than it is for day-to-day expenditure”.
It says some households have delayed buying or selling homes, while affordability constrains have had a likely effect.
It also says that changes to the buy-to-let market, including the surcharge in Stamp Duty and lower mortgage interest relief, have reduced demand.
The Bank released its latest inflation report as it decided to keep base rate at 0.75%.
By ROSALIND RENSHAW
Source: Property Industry Eye