Just as Britons spent much of July basking in the sweltering sun, the nation's property market got steadily hotter too. Breathless assessments of the surging house prices buzzed round the....
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div>Just as Britons spent much of July basking in the sweltering sun, the nation's property market got steadily hotter too.
Breathless assessments of the surging house prices buzzed round the month's headlines like wasps around a picnic.
While the heatwave may have been uncharacteristically long, the property market is clearly enjoying an old-fashioned boom.
Yes, this is partly due to a continued shortage of supply of housing stock. But the primary driver is the mortgage market, which is fast approaching not just normality, but even strength.
With the Council of Mortgage Lenders, Bank of England and British Bankers' Association all reporting the same steady growth in transactions, the market's improvement feels both concrete and sustainable.
For all its flaws, the Funding for Lending Scheme has encouraged lenders to make more cash available to borrowers, and brought down interest rates. A genuine price war is underway between many of the high street lenders.
The Governor of the Bank of England’s eagerly awaited “forward guidance” on interest rates this week will do much to continue that pattern.
Mark Carney’s pledge to keep the base rate at its record low level until unemployment falls to 7 per cent means that a rate rise could realistically be off the table for as much as three years.
All of this will fuel buyer confidence even further, but there is a danger that it may also lead some sellers to get carried away with asking prices.
Certainly this is hinted at by the Rightmove House Price Index, which has shown average asking prices reaching record highs for three months in a row.
While the flurry of upbeat economic news is stoking confidence both on the equity markets and among property buyers, the country is still a long way from achieving the “escape velocity” the Governor wants to see before he reins in the Bank of England’s loose monetary policy.
The housing market’s resurgence could come a serious cropper if asking prices get too far ahead of economic reality. The current strong demand should not be taken for granted.
If that happens, the impact of the cheap money made available under FLS will fizzle out. Forget escape velocity – if demand stalls, the property market will be heading back down to Earth with a bump.
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