According to The Bank of England, the number of mortgage approvals fell to their lowest level in nearly a year in March, giving the strongest indication to date that the recent interest rate rises are starting to cool the housing market. Figures from the Bank of England show that homebuyers took out 111,000 home loans during March – 6,000 fewer than February. This means that approvals are at the lowest rate since April and below the average for the past six months. Buyers seeking home loans for other purposes, including remortgaging, were also down with only 284,000 approved in March compared to 307,000 made a month earlier.
Recent housing market surveys have shown that price rises moderating, but not in London and Northern Ireland.
Economists are predicting that further falls in the number of mortgage approvals are expected in the coming months.
The Bank of England’s Monetary Policy Committee will meet next week to decide on the next move in UK interest rates. The outcome is likely to be raises of UK interest rates say many market analysts. This may be an attempt to take the heat out of the UK housing market, which up until last month was rapidly increasing.
Experts have also said that The Bank of England’s lending figures may be the first indication that previous rises in interest rates are beginning to have an impact.
“Possibly the first hint of a softening of housing activity on the back of recent monetary tightening and the expectation of more to come,” said Peter Newland, UK economist at Lehman Brothers.
The effects have also been seen between February and March in the number of customers borrowing money on credit cards and loans, said The Bank of England. £900m extra was lent to credit card and loan customers during March, compared to £1bn in February.
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