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Lending slows as house price optimism drops

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Mortgage lending started 2015 in a sluggish fashion with confidence in house prices falling to an 18 month low, according to Halifax.

The bank’s housing market confidence tracker found that while the average house price grew 2% to £193,130 in January just 52% of consumers expect further growth in the coming year.

This is the most pessimistic result since June 2013 and down from the 62% recorded in the previous survey.

Halifax pointed to the decision of the Bank of England’s monetary policy committee to keep interest rates at 0.5%, despite the economy growing 2.6% in the last year, as an example of the lack of confidence in the market going forward.

Craig McKinlay, mortgages director at Halifax, said lending had hit a traditional lull over the Christmas period and that confidence should rise as the year goes on.

“More than half of consumers still believe house prices will be higher than they are now in a year’s time; however optimism has continued to weaken,” he said.

“Despite this the fundamentals remain in place and we’re now seeing a return to the seasonal trend for house price activity. Traditionally, a slow start builds to the summer before another lull and then a further period of increase followed by a gradual easing at the end of the year.

“Of more concern are the figures from the DCLG showing a slowdown in the number of new homes being built. It’s widely acknowledged that the UK needs an increase in the amount of new housing being built. The Lloyds Banking Group Commission on Housing targeted 2 to 2.5 million new homes built by 2025 new homes to be built before 2025. If we are to address demand the increase in new homes coming onto the market needs to be sustainable.”

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