ONS figures showcasing the house price index for England as 0.9% higher than at the previous peak in 2008 have started a discussion on whether or not the UK is heading for a house price bubble. The main concern is the risk that there could be a return to the practices of the last decade where housing got out of control. While the market is moving towards a recovery, most feel that we are still some way off from experiencing a bubble, despite the widespread media speculation on the topic.
Nevertheless, statistics released by the British Banking Association are widely positive on house purchase and remortgage lending figures: gross mortgage borrowing increased slightly in August, up to £9.3bn from July’s £9.2bn and this is above the six-month average of £8.4bn - good news for even the gloomiest economic forecaster.
While average prices are being skewed by the London market, house prices are at their highest level since 2009, suggesting that consumer confidence is growing. Lower interest rates and more easily surmountable criteria from lenders, combined with Government-backed projects such as Help to Buy and the Funding for Lending Scheme, have proved attractive to investors, with brokers and estate agents reporting high levels of enquiries.
There is still a way to go: transactions are still well below their pre-2008 levels but there is optimism that the positive trend will continue. The recent publication of the Mortgage Market Review, in consultation with industry members, aims towards a ‘sustainable market that works better for all participants’. Measures for greater transparency and a greater emphasis on responsible borrowing and lending are good news for both the industry and consumers, ensuring a healthy and functioning market.
So while it may not be time to break out the champagne just yet, there are encouraging signs that a recovery is underway. However, rather than a repeat of the cycle of unsustainable growth that sparked the crisis in the economy in 2008 (not to mention the housing bubble bogeyman), the current approach puts the UK on the path to a measured and genuine recovery.
