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London housing market facing “natural correction”


The London housing market could slow down as a result of a “natural correction” to inflated house prices.

House prices have increased nationwide recently, with this effect being particularly exacerbated in the London area.

However, Graham Beale, the Chief Executive of mutual building society, Nationwide, has said there has already been a “slowing down in the market place” as house buyers have started to baulk at higher prices.

He added: “At some point buyers just start saying no”.

A six year high and an eight month low

On the face of things, the mortgage market is booming, as the British Bankers Association (BBA) recently said that mortgage lending has hit a six year high of £12.2bn. However, looking further into the figures, the number of mortgage approvals also fell to an eight month low, as the market appears to be driven by fewer people lending more money.

This theory of fewer people lending more was backed up by Nationwide, who said that despite increasing mortgage lending by 31% in the last tax year, only 2.4% of its mortgages were to those with a deposit of 10% or less.

However, some banks are beginning to take measures on those who are lending large amounts of money to buy a house. For example, Lloyds Banking Group recently announced that it would restrict lending to four times a borrower’s income for mortgage applications of £500,000 or more. They said these measures were being taken because of “specific inflationary pressures in the London housing market”.

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