The housing market has been sending out some rather mixed messages lately.
On the one hand, a string of headlines has brought the news that house prices have reached record highs.
On the other, a wave of reports suggests demand in the market is calming down amid a growing mood of house hunter caution.
Another aspect of the market which appears pretty contradictory is mortgage rates. In recent months, speculation has grown over the prospect of the Bank of England starting to increase from its historic 0.5% low, which will eventually push up costs for borrowers.
But as this debate has raged, a mortgage price war has broken out, with many lenders actually making their rates cheaper.
All this can make for confusing reading for people trying to keep track of the housing market.
So, to cut through any confusion, firstly let’s deal with the new mortgage price war.
A string of lenders, including Halifax, Metro Bank, Barclays, Nationwide Building Society, HSBC, and Virgin Money have all sharpened up their prices recently.
So what’s behind the fresh wave of mortgage rate cuts?
Well, experts offer various possible clues. They suggest some lenders may be looking to meet particular end-of-year targets, so they’re ramping up their efforts to pull customers in by polishing up their mortgage deals.
Secondly, swap rates, which lenders use to price their loans, have been declining, meaning that lenders’ own funding costs have reduced slightly.
Thirdly, some analysts have suggested that some lenders may still be sitting on cash they received as part of a Government scheme called Funding for Lending. This scheme launched in 2012 and gave lenders access to cheap finance - on the condition they passed on the benefits of getting this money to borrowers. The initiative was re-focused in 2014 away from households and towards helping businesses.
It’s also been suggested that the mortgage price war is a sign of lenders getting to grips with stricter mortgage lending rules. Launched in April, the new rules introduced under the Mortgage Market Review (MMR) force lenders to demand more evidence from people applying for a mortgage to back up what the applicant says about their spending habits.
This is so that the lender can make sure that the borrower can truly afford their home loan, both now and when interest rates rise. The market saw some disruption around the time the rules came into force.
And now to tackle another seemingly contradictory message - why have some reports shown house prices hitting new records as others have pointed to the market cooling off?
Well, this is not necessarily a case of who’s right and who’s wrong. Many house price reports have a time lag of a couple of months, while other property market surveys give a more up-to-date “snapshot” of current trends.
This means that sometimes you need to piece various bits of information together like a jigsaw to get the full picture.
So, for example, some figures released last week by the Land Registry showed London house prices have leapt by 21.6% annually in the strongest annual growth seen in the capital for 14 years.
As this news emerged, a separate report from property analyst Hometrack said that the London market is seeing a pronounced slowdown.
But the Land Registry figures were for the month of August, whereas Hometrack’s were more recent, covering September. The Land Registry records the prices of houses which have actually sold. Hometrack asks estate agents and surveyors about achievable selling prices, making its survey more of a forward-looking indicator of what is likely to happen next.
When taken together, the two reports point to the pace of house price growth cooling in the coming months in the wake of some previous strong gains. This chimes with a recent prediction from the Bank of England, which expects the pace of house price growth across the UK to halve by next spring.
And this trend of a calmer housing market which has been seen in the more immediate “snapshot” surveys is also now starting to filter through into some house price studies, with Nationwide Building Society reporting this week that house prices edged down slightly in September from an all-time high seen in August.