An increase in mortgage activity and the sale of new houses is offering clear signs that the housing market is picking up pace once again.
A total of 56,475 mortgage applications for home purchases were approved by lenders in July, according to LSL Property Services, an increase of 21% from July 2012.
Meanwhile, homebuilders are also reporting a significant rise in sales. Newcastle-based Bellway Homes said that reservations on new homes had risen by 27% on last year. It added that it had increased sales by 8.2%, to 5,652 homes.
Activity in the market has been boosted over the past year by government schemes such as Funding for Lending and Help to Buy, which have pushed mortgage rates down and encouraged more interest in new-build homes.
Bellway said the Help to Buy scheme had boosted confidence amongst homebuyers, encouraging more to consider a new build. Fellow constructors, including Barratts and Taylor Wimpey, have also voiced their support.
The controversial Funding for Lending scheme launched last year has proved detrimental to savers and has largely ignored small businesses to concentrate on the residential mortgage market.
But borrowers have been able to take advantage of some of the lowest rates on record. The lowest-risk category borrowers, who have a 40% deposit or existing equity, can fix for two years at just 1.49% with HSBC.
The housing market is strengthening, but prices are rising as demand outstrips supply.
With signs that house prices are rising above the level of inflation, there is a clear risk that the stimulatory measures could begin to alienate those they are designed to support.
Ben Thompson, Managing Director of the Legal & General Mortgage Club, believes that it is time to focus on the supply of new homes to avoid the market becoming overheated.
"Whilst we can see that the Government fully appreciates that we need a healthy housing market... It is just as important, if not more so, to focus relentlessly on freeing up the ability for many more new homes to be built in the right areas in the UK," he said.
"Yes, we need a healthy market, but a healthy housing market has to be one that allows first time buyers to be able to afford to buy at a sensible age."
Keith McDonald
Which4U Editor
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