Lending in recent months has been underpinned by stronger remortgaging activity, with borrowers anticipating a greater likelihood (which may have receded again more recently) that the Bank of England will raise interest rates in the spring.
Bank data published this week showed approvals for remortgaging totalling 37,000 (unadjusted) in January – the highest figure for more than two years.
It is, however, always difficult to read trends in mortgage and housing markets in the early months of the year, and in 2011 it is more difficult than in many other years to discern market direction, given the combination of a significant rise in VAT at the start of the year, the effects of government spending cuts, the impact of developments on consumer expectations and confidence, and the disruption to housing market – and wider economic – activity caused by severe weather in December.
But, even allowing for the added difficulty in discerning market trends in the early months of 2011, there is little that we can see that would cause us to revise our forecasts for the year.
While there has been a seasonal pick-up in house purchase demand in recent weeks, this appears to be weaker than a year ago, despite the fact there was a lull in activity at the start of 2010 caused by the expiry of the stamp duty concession at the end of 2009.
Our underlying view remains that 2011 is set to be a challenging year for households and the housing market, and our current forecasts remain unchanged.
