"The fundamentals remain. There's still lots of demand, we're not building enough homes. The question is who's motivated to transact in the near term".
-Richard Donnell
U.K. mortgage approvals rose and house prices continued their steady advance in the weeks before the country's vote on its European Union membership. UK mortgage approvals for house purchases increased to 67,042 for May from 66,205 for April and were also higher than expected figure of around 65,000 for the month. Although the total was still below the six-month average of just over 70,500, the data will boost near-term confidence in the housing sector. Trends in approvals will now be watched very closely to assess the referendum economic impact.
The outlook for the housing market has altered in the past week after the U.K. voted to leave the EU. With uncertainty about the economy on the rise and the country possibly heading for a recession that could undermine property demand and halt price gains. Interest rates remain at very low levels with the effective rate on new mortgages at 2.41% for May, which was the lowest rate since the series started in 2004, and certainly those lowest rates for over 40 years. Thus, changes in the housing sector will have an important overall impact on the economic outlook and will be monitored closely over the next few months.
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