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Mortgage approvals fall to six-month low in September as experts warn of ‘fragile’ housing market

Mortgage approvals fell to their lowest value in half a year in September, according to the latest data from UK Finance, meaning every month of 2018 so far has dropped against 2017 approval numbers.

Lending amounted to £21.5bn for the month, the lowest since the £20.6bn recorded in April and a drop of 1.2 per cent on the same period in 2017.

High street banks’ mortgage approvals fell by 9.1 per cent year on year.

New house purchases fell 10.1 per cent and remortgages dropped 7.4 per cent, the data showed.

Eric Leenders, managing director of personal finance for UK Finance, said: “The mortgage market softened slightly in September, following strong remortgaging activity in the months preceding the recent base rate rise.

“The overall economic backdrop remains strong, with inflation falling back, a lower chance of further interest rate rises and high levels of employment, and we do not expect to see a more significant downturn in the housing market unless the wider economy starts to falter,” said Yopa chief property analyst Mike Scott.

Jeremy Leaf, north London estate agent and a former Rics residential chairman, added: “These figures reflect what we are seeing on the ground – we are still in a needs-driven, fragile market even though listings and demand are improving.

“Cautious buyers, as well as lack of competition especially for smaller stock, means transactions are taking much longer.

“We are hoping that Budget measures don’t knock the market completely off course and help to improve accessibility for first-time buyers in particular, as they are the lifeblood of the market.”

Howard Archer, chief economic advisor at EY Item Club, warned that the low approvals rate would impact house price growth, estimating a growth rate of around 2.5 per cent for 2018 and again in 2019.

“Caution over making house purchases may well be magnified by current heightened uncertainties over Brexit,” he added.

“Potential house buyers may also be concerned that they are likely to further interest rate hikes over the medium term following August’s hike.”

UK Finance also found that personal borrowing through loans and overdrafts grew by 2.3 per cent in the year to September, as credit card spending hit £10bn last month – 3.4 per cent higher than last September.

Outstanding levels of credit card borrowing also grew by 5.7 per cent over the past 12 months.​

Leenders said: “There has been modest year-on-year growth in card spending. However, borrowing through personal loans and overdrafts has contracted slightly in recent months, suggesting demand for unsecured household finance is becoming more subdued.

“Consumers are increasingly choosing to keep cash close to hand, with deposits held in instant access accounts showing steady growth.”

Source: City A.M.