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Fewer mortgages approved as housing market ‘cools’

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30/01/2007

New mortgage approvals for December fell compared the previous month, according to figures from the Bank of England.

December saw 113,000 new homeloans approved, down from 129,000 in November, and significantly below the average of the previous six months as fewer people made a UK investment into property. However, in terms of the amount of money lent – £10.6bn – it was another record month.

Many property market analysts see this as further evidence of a cooling of the housing market, reflecting figures from Nationwide Building Society that showed house prices slowed in January.

December is a traditionally quiet month for homebuying, although mortgage approvals do not necessarily fall in the month. However, approvals are regarded as a key indicator of short-term movements in the property market.

If the fall continues for a few more months then this could indicate a more long-term falling trend in the market.

Nationwide’s chief economist Fionnuala Earley said: “Only time will tell how much the surprise decision will affect sentiment in the housing market, but even before January’s rate rise there were already some very early signs of cooling.”

She continued: “It is likely that we will now begin to see a weakening in demand as a result of stretched affordability and rising interest rates.”

 

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