Housing shortage may reduce BoE’s mortgage boom forecast

The chief economist at the Council of Mortgage Lenders said he disagreed with estimates presented in the BoE’s 18-page Inflation Report earlier this month.

The BoE had projected a rise from 70,000 mortgage approvals for home purchase in the first quarter of this year to 90,000 approvals in the second quarter, marking a return to pre-crisis levels of approvals.

Mr Pannell said: “This would seem to imply property transactions running at an annualised rate of 1.5m or so. We think this may be over-optimistic, given the growing anecdotal reports of a shortage of prospective sellers.”

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His comments coincided with the publication of CML figures showing an 8 per cent drop in gross mortgage lending from December to January. However, last month’s amount, £15.5bn, was still up 33 per cent compared to last January, when it was £11.6bn.

Mr Pannell attributed last month’s blip to “seasonal factors”, saying market indicators continue to be “positive”.

However, Henry Woodcock, principal mortgage consultant at financial services software provider Iress, said the mortgage market review could also slow sales, offering a “speed bump” as lenders and borrowers come to terms with the new regulations.

He said: “More detailed affordability testing will increase the chances of applications being declined initially. How lenders, brokers and consumers come to terms with the changes in April may be the making or breaking of the market.”

David Brown, commercial director of conveyancing specialists LSL Property Services, suggested that brokers could witness an “extra short-term rush” in business ahead of the MMR but that the market is “on a steady trajectory and gaining altitude” for now.

Andy Frankish, new homes director at the Mortgage Advice Bureau, also said he expected the recovery to continue “with the Bank of England ready to intervene and dampen house price growth if necessary”.


Ashley Brown, managing director of London-based adviser Moneysprite, said: “The big question is what will happen when Help to Buy comes to an end. We cannot ignore the problem surrounding low property stock levels which is creating a bottleneck of frustrated buyers.”