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Mortgage approvals fall to lowest level since July 2013
Mortgage approvals have fallen to a 16-month low, adding further weight to the argument that the housing market is slowing down.
Lenders approved just 61, 267 mortgages in September, figures published by the Bank of England revealed this morning, continuing the decline from a peak at the start of this year.
In total, banks approved 20 per cent fewer mortgages than they did in January, when levels reached a peak of 76, 472.
The drop is bigger than some economists had forecast, although it is around the same level reported last week by the British Bankers' Association.
The drop can be largely attributed to the measures introduced earlier this year, limiting the amount mortgage customers can borrow to 4.5 times their salary and introducing a "stress test" to ensure that, even if interest rates rise by three per cent, they will still be able to pay.
IHS Global Insight's chief UK and European economist Howard Archer said the fact approvals were still falling after lenders had “likely got to drips with the new mortgage regulations” suggested there was “an underlying moderation in housing market activity”.
He said:
With housing market activity clearly off its early-2014 highs, we suspect house prices will generally rise at a more restrained rate over the coming months. Specifically, we expect house prices to rise by around one per cent quarter-on-quarter in the fourth quarter of 2014.
House prices should rise by around five per cent next year, he added, down considerably on the double-digit growth seen this year.
Archer added:
Looking ahead, significant restraint on house buyer interest is expected to come from more stretched house prices to earnings ratios, the prospect that interest rates will eventually start to rise in 2015 and tighter checking of prospective mortgage borrowers by lenders.
Even so, buyer interest in houses is unlikely to fall away with appreciable support is likely to come from elevated consumer confidence, markedly rising employment, and still low mortgage interest rates, especially as they now look unlikely to rise before mid-2015.