Too many indices create a froth

Robyn Hall

September 26, 2013

In its newsletter the Council of Mortgage Lenders said it does not believe the UK is experiencing a boom but instead is at the start of a healthy and broad-based recovery in activity.

It said: “Despite differences between what the various indices show they present a broad picture in which market sentiment has changed quite abruptly over recent months and parts of the UK, not just London and the south east, are now beginning to see a recovery.”

The Office of National Statistics

The ONS reported price growth in England was being driven by London where is said prices had risen by 9.7% annually and to a lesser extent by the South East at 2.6% and the East Midlands at 2.4%.

The annual rate of house price increase in the UK in July nudged up 3.3% from 3.1% in the preceding month but if London and the South East were excluded the annual rate of increase dropped to 0.8%.

The index put price rises at 3.7% in England and 1.8% in Northern Ireland, but falling by 2% in Scotland and 0.7% in Wales.

In reporting a report by the Financial Times it said the ONS data showed “the diverging economic fortunes between the capital and the wider UK housing market” but the CML said this recent divergence can be attributed to differing methodologies producing contradictory sets of data.

The CML said: “The ONS index, for example, only includes transactions involving a mortgage with cash-only purchases, which comprise a substantial proportion of sales, being excluded.”

LSL Acadametrics Index

Cash sales are, however, included in the LSL Acadametrics index, which in its most recent figures showed a similar rate of growth to the ONS measure at 3.2%.

LSL/Acadametrics also publishes measures for transactions in Scotland and Wales which showed that prices were falling at an annual rate of 1.1% and 1.6% respectively reinforcing the picture of variable local conditions.

It also reported growth in the volume of sales with the number of transactions exceeding 70,000 for the second month in a row.


Indices operated by Halifax and Nationwide have also reported different rates of price increase although both showed that prices remained substantially below their 2008 peak.

The Halifax index showed prices in the three months to August were 5.4% higher than in the same period a year earlier.

That was higher than July’s annual 4.6% increase and the highest annual rate since June 2010 which was 6.3%.

But the recovery shown by the Halifax index is only a very recent phenomenon with the rate of price increase picking up from an annual rate of just 1.1% as recently as March 2013.

In reporting its numbers Halifax concluded that “the relatively low level of mortgage payments in relation to income is supporting housing demand”.

Halifax data showed that the typical mortgage payments for a new borrower, at the long-term average loan to value ratio, accounted for 27% of disposable earnings in the second quarter of 2013 – the lowest proportion since 1999 and comfortably below the average of 36% over the past 30 years.


The Nationwide index showed that the annual rate of house price increase was 3.5% in August. Like the Halifax measure, however, the increase shown by Nationwide is only a recent phenomenon.

As recently as spring its measure showed that house price growth was broadly flat.

Nationwide argued that a number of factors appeared to be contributing to the recent upturn in house price growth. It said consumer confidence had increased significantly in recent months thanks to modest gains in employment and signs that the UK economy was finally gathering momentum.

In its commentary it said: “An improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures such as the Funding for Lending and Help to Buy schemes, is enabling more people to take their first steps into the property market.”

Nationwide also pointed to the CML’s data which suggested that the recent upturn in activity has been driven by first-time buyers who accounted for 45% of house purchase loans in the second quarter the highest share since the series began in 2005.

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