Mortgage approvals fall as demand weakens

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The housing market is showing signs of cooling, but consumers have entered the new tax year in a fairly upbeat mood, reports released on Monday showed.

There were 75,098 mortgage approvals in March, said the British Bankers’ Association, down 12 per cent on the same month last year.

Underlying net mortgage lending rose by £5.1bn - partly reflecting higher house prices - but this was below the recent average of £5.5bn.

David Dooks, BBA director of statistics. said that higher interest rates were starting to influence borrowing.

“In the last two months net lending has risen less sharply and, compared to the same time last year, the number of mortgages approved in March was lower, indicating that weaker demand is starting to emerge,” said Mr Dooks.

Higher interest rates have made people more reluctant to use credit to fund their spending. Net borrowing on credit cards was £7.02bn in March, 3 per cent less than a year earlier.

Growth in house prices slackened slightly during April, according to a survey by Hometrack, the housing information business.

House prices rose 0.7 per cent to an average of £174,600 during the month, down from 0.8 per cent in March, according to an index based on information from estate agents.

Hometrack said it expected a slowdown in the rate of house price growth over the second half of the year, as a result of pressure on affordability and an increase in the supply of houses for sale.

Richard Donnell, director of research, said there were ”a number of indicators within the survey that lead us to believe that higher interest rates and growing affordability pressures are starting to have an impact on the rate of growth”.

But despite higher borrowing costs, households are becoming slightly more optimistic.

The latest survey by GfK NOP, the market research group, showed its headline index measuring consumer confidence rose by 2 points to minus 6 in April.

Carol Bernasconi, divisional director at GfK NOP said: “Consumers are feeling more positive as we go into the new tax year, the general feeling seems to be that economically things are better and going to be better; now is a time to spend, the Easter sales and the Easter break seem to have had a positive effect on opinions.”

Richard McGuire at RBC Capital Markets said the consumer confidence numbers suggested there was little sign that household’s had yet been cowed by recent interest rate rises.

“While remaining on the soft side when viewed in a recent historical context, the fact that consumer sentiment appears to have firmed despite the backdrop of negative real income growth and the Bank of England’s ongoing tightening campaign will likely assuage any possible concern within the monetary policy committee as regards the risk of overtightening, “ added Mr McGuire.

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