Another house price rise has been confirmed for May, with the average property increasing by 2.6% during the month.
The latest figures from Halifax show the average house price is now £158,565. This is, however, 16.3% lower than the same month last year.
Nitesh Patel, housing economist at Halifax, says: "It is always important not to place too much weight on any one month's figures. Historically, house prices have not moved in the same direction month after month even during a pronounced downturn.”
For example, prices fell by 11% nationally during 1991 and 1992, but there were also five monthly price rises during this period.
However, Patel says there are some tentative indications of a possible stabilisation in activity. The number of mortgages approved increased by 10% during the first three months of the year, although approvals in the three months to March were 45% lower than in the same period in 2008.
“House sales remain substantially below their long term average and market conditions are expected to remain difficult with housing activity continuing at low levels over the coming months,” says Patel.
Earlier this week the Bank of England published figures that revealed the number of new mortgages approved by banks crept upwards in April. There were 43,000 mortgages approved during the month, up from 40,000 in March.
Although this is still less than the 55,000 mortgages approved in April 2008, it represents the third consecutive monthly increase in lending and the busiest month since April last year.
Paul Samter, an economist at the Council of Mortgage Lenders, believes that May will show another rise in mortgage approvals. However, while April’s figures show a marked improvement from last November’s trough of 27,000, mortgage approvals remain at under half its 20-year average.
“Activity remains at extremely low levels on any historic comparison – and weaker than at any point in the early 1990s,” warns Samter. “Limited lending capacity and the impact of further job losses are likely to act as a ceiling for how far the improvement can continue."
And Philip Shaw, economist at Investec Securities, is concerned that April’s figures don’t show enough of an improvement. He points out that gross mortgage lending (that is to say, loans before repayments) totalled just £10.9 billion during the month - the lowest for over eight years.
“Given that quantitative easing [creating more money] was launched in March, we consider this to be somewhat disappointing,” he adds.
Approvals are still some way off the levels of 75,000 a monthbseen during periods of house price inflation. Vicky Redwood, housing economist at Capital Economics, warns it could take a year for mortgage approvals to return to these levels - or longer if banks remain reluctant to lend.
Charles Davis, economist at the Centre for Economic Business Research, agrees: “The impact of the financial crisis cannot just blow over like a passing storm - lending remains at structurally lower levels than we have been used to in recent years.”