Mortgage Approvals in 2007 fall to new low

Evidence of a cooling housing market increased yesterday, there is evidence that the number of new mortgage approvals has fallen quite sharply.

The Bank said the number of approvals – loans for house purchase agreed but not yet made – fell to 111,000 from a downwardly revised 117,000 in February.

That was the lowest since April 2006 and well below forecasts for a reading of 117,000.

Nevertheless, housing date from March, suggests that house prices continue to rise at a double digit rate. The main reason for the increased house prices is the continued shortage of supply in the UK housing market.

Despite the decline in mortgage approvals base rates are still predicted to rise, when the MPC next meet. This is because inflation is currently above the governments inflation target of CPI 1 – 3%. However, this next rise in interest rates may further reduce demand for mortgages. Therefore, over time the interest rate rises are likely to reduce inflationary pressures; this means that interest rates may soon be peaking.

UK Housing Market