House price confidence drops

UK consumer confidence in the housing market has dipped for the second month running, according to the latest Woolwich Mortgage Index.

Woolwich, which is the UK's fourth largest mortgage lender, bases its measure of consumer confidence on surveys of homeowners, who are asked whether or not they believe the value of their property will increase over the next 12-month period.

Average consumer confidence fell from 61% to 59% throughout the UK over the last three months - the first fall in confidence since November 2001. However, homeowners' confidence remains stronger year on year: average confidence was 7% lower at 52% in July 2001.

The results of this research, however, come in contrast to a significant rise in gross mortgage lending, which has increased by 17% over the last month and exceeded ?20bn in July, increasing from ?17.1bn in June. Andy Gray, head of lending at the Woolwich, said: "We have seen a clear indication that people's confidence in the housing market is starting to decline, although this is not reflected in the level of activity across the market, which has once again seen great results. June was a quiet month: the impact of the bank holidays and World Cup tempered activity. Increased lending for July is a direct result of the market playing catch-up. As reduced confidence restrains people's buying activity we will see more moderate growth in the housing market over the coming months."

A spokesperson for the Woolwich explained that "confidence figures do not have a direct effect on the market immediately. It generally takes a couple of months at least for consumer confidence to kick in to lending figures."

The Woolwich found that consumer confidence levels were not consistent across the country.
East Anglia and the south-west (the two regions that have seen the highest growth in house prices this year) are the most optimistic homeowners in the UK: average consumer confidence is recorded at 64% in East Anglia and 72% in the south-west compared to the national average of 59%. The bank also noted that homeowners in their 20s were less optimistic about house prices continuing to rise than people in their 50s.

A spokesperson for the Halifax, Britain's largest mortgage lender, concurred broadly with the Woolwich's findings. "It's what we've been saying for the past couple of months," he said. "The recent rate of growth is unlikely to continue, but we are not unduly worried by the figures. There is still room for growth within the market: it's just going to be slower growth".