(Bloomberg) -- The outlook for the U.K. housing market is “highly uncertain” after the vote to leave the European Union caused transactions to slow, the Bank of England said.
Record-low benchmark rates have sent property prices surging across the U.K. as homeowners borrow more to buy properties or refinance their loans. Mortgage lending to U.K. households rose 3.2 percent in the 12 months to September, the highest level since 2008, the central bank said in a financial stability report Wednesday.
The U.K.'s housing market may be at a turning point following the country's vote to leave the EU and indebted households are particularly vulnerable to economic shocks such as higher unemployment, the European Systemic Risk Board said Monday. From a year earlier, house price growth in the three months through October was 2.8 percent compared with 9 percent in the three months through February, the BOE said.
“The housing market has softened in recent months, though it has performed more strongly than some indicators had suggested in July and August,” the BOE said. “An uncertain macroeconomic environment raises the prospect that households could face challenges to their ability to service their debts.”
An increase in the stamp duty sales tax in April has slowed the number of purchases by landlords and there is no evidence of a widespread sell-off by investors as the market softens, the central bank said. Legislation to give the BOE's Financial Policy Committee powers over mortgage lending to landlords is currently being considered by lawmakers.
It now costs the average Londoner more than 14 times their annual gross salary to purchase a home, the highest level ever, according to data compiled by property researcher Hometrack.
To contact the reporter on this story: Joe Mayes in London at jmayes9@bloomberg.net. To contact the editors responsible for this story: Neil Callanan at ncallanan@bloomberg.net, Andrew Blackman
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