Weakening UK housing market: Mortgage approvals fall to lowest in eight months

Estate agents' boards are seen in south London, Tuesday Feb. 17, 2009. British homeowners are returning to the property market looking to pick up bargains following recent hou
Estate agents' boards are seen in south London, Tuesday Feb. 17, 2009. British homeowners are returning to the property market looking to pick up bargains following recent hou Copyright Matt Dunham/AP
By Euronews with Reuters
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The latest data suggests a further slowdown in the property market due to rising borrowing costs.


In September, UK mortgage approvals fell to their lowest level since January, according to the Bank of England (BoE), in a further sign of how rising borrowing costs are slowing the property market.

British lenders approved 43,328 mortgages in September, falling short of the market consensus of 45,000. The data about the approvals for mortgages serves as an indicator for future borrowing in the UK. 

Two other recently-released data sets are also buttressing the decline of the UK housing market; the repayment of mortgage debts surpassed the amount of borrowing in September 2023 when net repayments were at £0.9 billion (€1.03 billion) on mortgage debt, in contrast to the net borrowing of £1.1 billion in the previous month. 

This marked the largest amount of net repayments since April.

During the same period, approvals for remortgaging (only counted if it is with a different lender), dropped to 20,600, the lowest level since January 1999.

What lies in store for the housing market in the UK?

A separate report from online property portal Zoopla shows an accelerating decline in overall property prices in the UK: The House Price Index showed an annual fall of 1.1%, following last month's 0.5%. 

According to Zoopla, prices in 80% of the local housing markets in the UK are heading south. 

House prices are falling across all regions of England and also in Wales for the first time. Bournemouth (-2.6%), Cambridge (-2.3%) and Southampton (-2.0%) are the major cities where house prices are falling the most.

Property prices are still rising in Scotland and Northern Ireland, though. 

In its outlook for 2024, Zoopla forecasts a further 2% fall in UK house prices during 2024, which when paired with rising incomes will improve affordability, despite the fact that mortgage rates are expected to remain higher for longer. 

Zoopla expects sales to reach one million in 2024. 

Further prospects for the UK economy

High interest rates continue to weigh on the UK housing market, as well as other sectors of the economy. The Bank of England has raised interest rates from 0.1% to 5.25% - an unprecedented policy tightening between December 2021 and August this year - in an attempt to tackle high inflation.

Some economists are worried that the increased cost of borrowing is pushing the country into a recession. The latest data from the BoE also shows a sharp fall in UK money supply, further fuelling recession concerns

Now, many expect that the Bank of England is done with hiking rates for the moment, as it kept them on hold in September and is expected to do so again on Thursday.

"Overall, higher rates are gradually working and this supports our view that the Bank has finished hiking interest rates," Ashley Webb, an economist with Capital Economics, said.

"Looking ahead, our forecast that the Bank won't cut interest rates until late next year suggests that lending will remain weak over the next few quarters."

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