Nationwide Say House Prices Rose 0.9% in June
The latest survey from the Nationwide building society UK house prices rose by 0.9% in June.
It said this was the third rise in the past four months, and shrank the annual rate of decline to just 9.3%, from 11.3% in May.
The increase in prices during the past month means the average home now costs £156,442, which is £15,973 less than a year ago.
The Nationwide said the stabilisation of prices was a “welcome surprise”.
Since their recent low point in February, of £147,746, average UK house prices as measured by the Nationwide have now risen by £8,696.
“House prices have now risen in three of the last four months, suggesting that the improvement that began to show up in March represents more than just statistical noise,” said the Nationwide’s economist Martin Gahbauer.
“What is unusual about the recent trend reversal, however, is that it has taken place against a background of transactions activity that is still very low by historical standards,” he added.
The Nationwide said the best measure of short-term trends was to compare the average price for the past three months with that for the previous three.
On that basis, prices were now 0.9% higher, the first time they have been on an upward trend since December 2007.
The building society said that if this pattern continued then this year would end with prices down by only “small single digits”.
“This would represent a stark shift from trends seen at the turn of the year, when most indicators were pointing to a repeat of the large declines seen in 2008,” it said.
Although there has been no let up in rationing of loans by mortgage lenders, the building society said potential sellers, and builders, were putting very few properties up for sale, which was bringing some equilibrium to prices.
But it warned against interpreting its latest data as the beginning of a sustained recovery in prices.
Abnormally low supply levels would not last for ever, it warned.
The increase in the enquiry pipeline has not yet led to large increases in sale volumes, because credit criteria remain significantly more restrictive than in the years leading up to the downturn,” said Mr Gahbauer.
“Rising unemployment and associated job insecurity are also limiting the extent to which enquiries can translate into real transactions,” he added.
A report by HM Revenue & Customs (HMRC) Last week said that completed house sales in the UK had risen again in May, to their highest level since last October.
And on Monday, the Bank of England reported that the number of mortgages approved by lenders, but not yet lent, had risen for the fourth month in a row in May.
This suggests that the revival in buying and selling seen this spring may continue into the summer.
“Nationwide house price data provides further evidence that the residential property market appears to have found a floor, at least for the time being,” said Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors.
Not all measures of house prices are pointing in the same direction.
Although the rival survey from the Halifax has also detected a recent upturn in prices, more comprehensive figures from the Land Registry for England and Wales reported that prices had still fallen in May, by 0.2%.
This meant the annual rate at which prices had dropped was 15.9%.
Mortgage Approval Rises Again
The Bank of England have released figures suggesting the property market continued to pick up during May,
The number of mortgages approved for house buying rose to 43,414, up from the figure of 43,191 in the previous month.
It was the fourth month in a row that approvals have risen, suggesting that the recent increase in sales is likely to continue.
The latest evidence from lenders has also suggested that the slump in house prices is slowing down.
The Bank of England’s figures show that net lending for house buying in May, by all lenders, grew by just £324m – the smallest monthly increase on record.
“Bank of England data suggests that mortgage approvals for house purchases only rose modestly in May,” said Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors.
“While mortgage approvals by banks actually rose by around 2,500, loans from building societies and other specialist lenders both fell during the month,” he added.
The Building Societies Association (BSA) said approvals by its members in May were still about 35% lower than in May last year.
“Therefore, while the mortgage market appears to have recovered slightly from the start of the year, levels of activity remain depressed,” said the BSA’s director general Adrian Coles.
Building societies saw their savers withdraw more money than they put in, for the third month in a row.
“Those banks that are supported by the state are able to compete unfairly for retail deposits, and steps need to be taken to ensure that government backing for some institutions does not distort competition for savings,” complained Mr Coles.
“These pressures are exacerbated by the current low interest rate environment; there is evidence that households are looking to repay debt rather than save,” he added.
Total lending by building societies shrank for the fifth month in a row, reflecting the fact that borrowers have been repaying their mortgages at a faster rate than they have been taking out new home loans.
OFT to Pursue Bank Charges Whatever House of Lords Rule
The Office of Fair Trading (OFT) will still pursue bank overdraft charges as unfair, even if it loses the current legal appeal in the House of Lords.
The announcement was made by Jonathan Crow QC, for the OFT, on the final day of an appeal before five Law Lords.
Seven banks and one building society are trying to overturn two previous rulings that would let the OFT investigate their overdraft fees.
Jonathan Sumption QC, for the banks, ridiculed the OFT’s concerns.
He said they were part of a “developing saga” which he suggested had no basis in law.
Mr Crow ended his submission to the Lords by pointing out that the OFT was not just concerned about the high cost of bank charges.
The OFT was, he said, also worried about the way bank accounts and their charges operated in practice.
“This relates to the interplay between the amount and the fact the customer does not truly consent to the charges,” he said.
He argued that bank customers were at a disadvantage at two stages: when they first opened an account and when they triggered the overdraft fees.
He listed some of the problems that bank customers faced.
The issue at stake is whether or not these regulations, which derive from European legislation, allow the OFT to scrutinise bank charges.
The banks argue that as their overdraft fees are part of the price paid by customers for having a current account, then they necessarily fall outside the scope of the regulations.
But Mr Crow argued that when people opened a current account “overdraft charges are not what is being sold as part of the bargain”.
He said the crucial distinction that meant the 1999 regulations did in fact apply to bank charges was that current accounts did not involve any free negotiation between customers and banks.
There was “no meaningful consent”, he said.
He went on to argue that overdraft charges could only escape the regulations if they were central to the bargain between bank and customer; were readily recognisable as the price of the service to the customer; and arose in the normal operation of the contract.
None of these conditions applied, he argued.
“Penal” conditions
Mr Crow accused the banks of “cosmetically rewriting” their terms and conditions in the past couple of years to disguise the penal nature of their overdraft charges.
He said that most banks had rewritten their terms and conditions to remove any suggestions that consumers were not allowed to go overdrawn and would be penalised for doing so.
One that still does is the Nationwide building society.
He pointed out that its terms and conditions stated explicitly that a customer can be expelled from membership for running up an unauthorised overdraft.
How could having an unauthorised overdraft be a central feature of having a current account under these circumstances, he asked.
Mr Crow went on to warn the five Law Lords hearing the appeal not to be scared of some dire warnings issued earlier by Mr Sumption.
He said it should not be assumed that the banks’ current policy, of providing free current accounts to people in credit, was doomed if their appeal failed.
The structure of current accounts might just need to be adjusted, Mr Crow said.
He denied that victory for the OFT implied there would be a deluge of litigation in other industries where cross-subsidies were common in pricing tariffs.
He also said it was “assuming a great deal” to suggest that banks might have to automatically make huge refunds to their customers if they lost the current appeal.
“Banks will not necessarily have to reimburse everything”, he said.
“The domestic courts will have to sort out the consequences,” he added.
He argued that they typically did not study the terms and conditions of their accounts; had no opportunity to opt out of their contract with their bank; could not work out in advance when the fees might be imposed; would find they were triggered without an explicit request to the bank for an overdraft; and often happened by mistake.
“The OFT is concerned that banks are capitalising on a mistake,” he said.
‘True consent’
The Law Lords will now consider their judgement and may refer some issues to the European Court of Justice.
That would further delay a final judgement on the OFT’s jurisdiction, in a legal process that started in July 2007.
At stake is the currently frozen ability of millions of customers to demand that their banks refund overdraft fees they consider too high.
For the banks, an adverse judgement could lead to them repaying billions of pounds in past charges, and foregoing income of more than £2bn a year.
Jonathan Sumption rejected the OFT’s reasons for keeping its campaign against bank charges going, even if it lost the appeal.
He said it was “quite impossible” for the OFT to use the concept of “true consent” in any further action over bank charges without re-writing the European directive on unfair contract terms.
“True consent is simply not the method by which the directive seeks to give effect to consumer choice,” he said.
During the morning of the third day of the appeal, Mr Crow attacked the banks’ claim that their charges were so central to the operation of current accounts that they fell outside the scope of the 1999 consumer contract regulations.
