Rising interest rates and higher taxes are taking a toll on parts of the housing market, according to data yesterday that revealed a recent surge in the number of repossessions.
But the overall market is continuing to present a mixed picture, with separate figures from Nationwide building society suggesting that the mainstream is demonstrating robust if moderating health.
The Royal Institute of Chartered Surveyors reports the number of residential properties offered at auction rose by 32 per cent between the first and second quarters of this year. The increase was pushed by repossessions, "as affordability conditions deteriorated following interest rate hikes", suggesting that a minority, especially those coming off low fixed-rate deals, are in distress.
The RICS estimates repossessions could rise to in excess of 45,000 in 2008, amounting to 124 repossessions per day. The highest concentration of auction activity was in the North-west of England, where 826 properties were sold. This area has seen the biggest quarterly pick up in repossession orders and Merseyside has seen a particularly acute rise. However such repossessions remain at historically low levels.
The broader picture is more upbeat. The Nationwide's survey showed house prices rose slightly more than expected – up 0.6 per cent on the month in August against the 0.5 per cent expected by analysts. Bank of England figures showed that banks approved thousands more mortgages for new homes than the City had expected in July. Consumer credit rose at its fastest since last November.
"Housing market activity has held up very well in the face of the five rate hikes seen over the past year," Peter Newland, an economist at Lehman Brothers, said. "The outlook remains very uncertain, but our best guess at the current juncture is that the impact [from the credit crunch] on the real economy will prove to be limited and the Bank of England will see cause to hike rates one more time."
George Johns, an economist at Barclays Capital, said: "Any further moderation in house price inflation is likely to be a very gradual process, rather than an abrupt downturn."
The Bank of England said consumer credit rose by more than £1 bn in July, above forecasts. But retail sales growth eased this month to its weakest pace since November, the CBI said.