A drop in the number of mortgages approved by lenders last month has added to growing evidence that the UK housing market is cooling.
The fall in approvals, reported by the Bank of England, was larger than expected and comes as Threadneedle Street moves to take some of the heat out of the market.
There were 61,267 mortgages approved in September, down from 64,054 in August, which represents a 14-month low.
Howard Archer, chief UK and European economist at IHS Global Insight, said the figures showed a moderation in housing market activity.
While the tougher lending requirements – known as the mortgage market review – could explain the drop in mortgage approvals earlier in the year, Archer said they could no longer explain the fall-back. “That mortgage approvals are still falling and in September were 19.9% below their January peak levels – after lenders have now likely got to grips with the new mortgage regulations – points to an underlying moderation in housing market activity.”
But he said the perception that interest rates will not rise from their 0.5% low until after the election could provide a “near-term lift” to the housing market. Rates were set at a record low of 0.5% in March 2009 amid the banking crisis.
The Bank of England recommends that lenders restrict the amount of lending to borrowers to 4.5 times their income.
via The Guardian