Slowdown Hits UK Housing Market

Recent months have been a period of slowdown for the UK housing market, and this has been further illustrated by the latest mortgage lending figures. According to newly-released data from the Band of England, August saw the number of mortgage approvals drop by almost 1900.

Altogether, August saw 64,212 mortgage approvals for the purchase of a residential house. This was down from July’s figure of 66,100, which itself represented a drop compared to the 66,923 approvals seen in the month of June.

These  figures back up the belief that many experts already had that the UK housing market is not going to keep up the pace it has recently displayed. According to HIS Global Insight’s chief UK and European economist, Howard Archer, “With housing market activity moderating from its early 2014 highs, we believe house prices are likely to generally rise at a more restrained rate over the coming months.”

This news comes soon after the revelation that this month has seen growth in house prices come to a stop. For the first time in a year and a half, according to Hometrack, house prices did not rise in September. Hometrack’s survey also identified the fact that more and more potential buyers are expressing concerns about the potential of a price bubble, as well as the fact that an increase in interest rates could be on the horizon.

The release of the Bank of England’s figures is also timely in coming shortly before new mortgage lending restrictions are due to take effect. Designed to cool off lending in the mortgage market, banks and building societies will be limited in their ability to lend to people who borrow more than 4.5 times their annual income.  Institutions will now be able to provide no more than 15% of new mortgages to customers within this group.

On the general sentiment among borrowers at present, Archer said: “While markedly improved consumer confidence – currently at the highest level for more than nine years – means people have become more prepared to borrow in recent months, they still appear wary of taking on a large amount of new debt.”

Mark Harris from SPF Private Clients, a mortgage broker, took a comparatively optimistic view. Harris pointed out that according to the figures, the remortgage market is in comparatively good health. This is largely thanks to homeowners switching onto better deals as lenders cut fixed rates.  However, Harris also warned about the possibility of interest rate rises in the near future. “While the governor of the Bank of England pledged that increases would be limited and gradual,” Harris said, “borrowers must still plan ahead and ensure they can afford their mortgage now and in the future.”

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