Mortgage approvals down as the rate rises start to bite
Mortgage approvals were down to a 12-month low in April according to the Bank of England, and many experts believe that this is due to Bank Rate rises.
The number of approvals totalled 107,000m in April, down from 110,000 in March and the third consecutive monthly fall.
In a further sign of weakening buyer demand mortgage lending rose by £8.9bn, a lot less than expected, and the smallest rise since September 2006. Consumer debt figures also confirmed the trend, rising by £498m, the smallest increase since March 1997.
“This is just the sort of news the Bank of England wanted to hear,” said City analyst Colin Perry. “It is terrified that inflation will undo all the good work of the past 10 years and the rate rises have been about controlling it.
“I think there is still scope for another quarter-point rise to 5.75% this summer and then consumer inflation should have cooled sufficiently to let them rest for a while, probably for the remainder of 2007, or even to make a small cut.”
However, the historically low interest rates of the past few years have led to massive personal debt in the UK, with the total amount outstanding nearing the £1.5 trillion mark.
Rising interest rates, while subduing inflation, also increase the pressure on hard-pressed borrowers and there are fears that many more mortgage holders will have their homes repossessed in the near future.