Soaring mortgage numbers renew fears of bubbly housing market

(Laura Lean/City A.M.)

The latest housing data is enough to fuel concerns that a "new housing bubble could develop in 2014", says IHS Global Insight's Howard Archer.

Council of Mortgage Lenders (CML) figures show mortgage numbers rising by 14.9 per cent in the year to November.

There's a more troubling surge among first-time buyers. They took out 27,000 loans in that month, up 24 per cent from a year ago.

But while government interventions to support lending push up demand, there remains a dearth of housing supply.

Archer says that the "limited supply of houses is a factor pushing up prices in an increasing number of areas and not just in London and parts of the South East."

House prices are now set to increase by eight per cent in 2014, and right across the country, according to IHS Global Insight - and there is a "genuine possibility that this could prove to be a conservative forecast".

Mark Harris, chief executive of mortgage broker SPF Private Clients, says that lenders are now less exposed to an interest rate hike, as inflation has fallen to the Bank of England's two per cent target for the first time in four years.

"Interest rates are not expected to rise this year which will further fuel confidence among buyers", says Harris.

But many investors are now pricing in an interest rate hike from the Bank of England, perhaps even before unemployment falls to the the Bank's threshold level of seven per cent.

If Bank governor Mark Carney then decides not to hike rates, he'll suffer from a serious credibility problem.