Lower mortgage rates are not expected to bring an upturn in housing activity. True, there was a strong rise in mortgage approvals last month as borrowers took advantage of falling rates. But this was mainly due to refinancing, and house purchase applications rose only modestly. (See Chart 1). Economic concerns and subdued buyer sentiment are set to moderate demand, while a lack of inventory will constrain existing home sales. House price growth has continued to slow and is set to dip to 2% y/y by the end of 2019. Rental demand has been supported by strong household formation and rising earnings growth, but that impetus is expected to fade as the economy slows.
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