Mortgage Approvals Down

Figures from the Bank of England show that mortgage approvals for buying homes were down again in November. Home buyer mortgage approvals numbered just 83,000 for the month, down from 89,000 in October, and the lowest figure since the beginning of 2005.

The reduction in approvals suggests that the housing market slowdown is likely to continue into 2008. The year of 2007 saw an overall rise in house prices of something like 5-7%, but from a high of 11% in mid-year there was a decline in prices in the second half of the year as high interest rates and then the credit squeeze began to have an impact. In addition, the rise of house prices took them out of reach of most would-be first-time buyers.

Most experts are now forecasting that house prices will fall or at best stay flat over the course of 2008. The cut in interest rates by the Bank of England in December has done little to revitalise the market, partly because many banks have yet to pass on the rate cut, but also because many people are already on a fixed rate anyway.

The Bank of England has also warned that it expects the number of households defaulting on their remortgage payments to rise in the first quarter of 2008. The global credit crunch is likely to continue, said the Bank, and banks will not be keen to lend money, leaving individuals finding it harder to move house, and businesses with less liquidity and therefore less room to do business.

Consumer spending and business investment are likely to suffer, and this will impact the wider UK economy. UK economist at Capital Economics, Vicky Redwood, said: “Together with the delayed impact of previous rate hikes and the global slowdown, the credit crunch should push GDP growth to 2% or lower this year and next.”

Expectation for a further cut in interest rates by the Bank of England in January are rising.

This entry was posted on Wednesday, January 9th, 2008 at 12:38 pm and is filed under Home Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.