As Halifax reports buyer confidence slipping, is the housing market finally cooling down?

Howard Archer, chief European and UK economist at IHS Global Insight, says Yes.

It’s not guaranteed that current signs that the housing market is cooling will prove lasting, but house price growth has likely peaked.

The new regulations under the Mortgage Market Review have clearly had at least a temporary effect in taking some steam out of market activity, although this may be partly due to banks adapting their procedures and taking longer to approve mortgages, as well as tightening their lending standards.

Significantly, however, the latest survey evidence from Hometrack, RICS and Halifax all suggest that buyers are becoming warier.

More stretched house price to earnings ratios, the prospect that interest rates will soon start to rise (albeit gradually), and tighter checking of prospective mortgage borrowers by lenders are all affecting buyer sentiment.

But with the economy seen holding up pretty well, consumer confidence up and earnings growth likely to improve, house price growth will most probably slow gradually.

Rob Wood, chief UK economist at Berenberg Bank, says No.

The prospects for house price inflation remain very strong. All we are seeing currently is it levelling out at around 10 per cent a year.

After all, the Halifax survey this week, which apparently showed buyer confidence slipping, also showed little sign that price inflation was going to slow soon: 71 per cent of those surveyed expected prices to rise over the next year – the same degree of optimism as in the previous survey.

Fears of interest rate hikes and housing market action from the Bank of England caused sentiment to wobble, but this will pass once the reality sets in that borrowing costs will remain very low for a long time still.

There has probably been some impact on London from the stricter mortgage standards implemented in April.

But the UK continues to build nowhere near enough houses to meet demand, while a strong economic recovery is now underway. All these factors will keep house price inflation strong, once the sentiment wobbles pass.