The number of mortgage approvals has fallen for the third month in a row down to just 107,000, leading parts of the industry to suggest the housing market is about to turn.
Latest figures from the Bank of England show – on a seasonally adjusted basis – the total number of mortgage approvals has slipped from 118,000 in January to 107,000 in April.
In addition, it shows net lending increased at its lowest level since September with a rise of £8.9bn, down from just over £10bn in February and £9.4bn in March, suggesting the demand from homebuyers is also slowing.
Gary Styles, strategy, risk and economics director at Hometrack, says the latest data from the Bank provides further support for its view that the housing market is at a turning point.
He says: “We can now confidently say the last four interest rate increases are changing the tone and outlook for the mortgage and housing market. With interest rates likely to rise again in the next few months we expect to see total mortgage growth to slow to 10% by the end of the from around 11.4% in April.”
However, Ian Kernohan, economist at Royal London Asset Management (RLAM), says the debate on UK interest rates is split between gathering evidence that the rate rises are already having the desired effect on the housing market, and concerns about inflation centred on monetary growth, corporate pricing power and food prices.
He adds: “The question is whether the activity numbers respond quickly enough to stop a move to 6% or even 5.75% or whether the Monetary Policy Committee (MPC) will play safe by raising rates further and risking a sharp slowdown in economic growth.”
Nicholas Leeming of Propertyfinder.com claims evidence is piling up that the housing market is cooling, as first confidence began to slip as interest rates rose, then evidence of slowing price growth emerged so that now it is quite clear appetite for mortgage borrowing is waning too.
He says: “All of this pre-dates the latest interest rate increase and the jump in supply of homes for sale ahead of the abortive attempt to introduce Home Information Packs (HIPs). Greater supply and lower demand are likely to accelerate the cooling through the summer.”
“It is quite clear that another interest rate increase is unnecessary. We need a period of stability now to allow the market to find its new level.”
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