Following five interest rate increases in the last year, the UK housing market is finally feeling the pressure. According to figures from the British Bankers’ Association, however, gross lending is continuing its climb, despite a fall in the number of mortgage approvals for house purchase.
The BBA found that gross mortgage lending increased by 12 per cent on last year’s figures. House price increases have increased the average size of loans for house purchase.
The director of statistics at the BBA, David Dooks, reportedly commented: "Lower approvals volumes simply reflected the seasonal pattern, so we expect the stable trend in the banks' lending to continue over the next couple of months."
Other experts pointed to a more sustained decline, however. A senior economist at RICS, Oliver Gilmartin, reportedly said: "With a decline in housing loans, slower housing market activity will rein in house price growth into Christmas," he said. "This will temper the sentiment that has supported consumer spending in recent months and which the Bank of England had identified as an upside risk to inflation. Tightening borrowing standards in response to sub-prime concerns could intensify the current slowdown in lending activity over the next six months. Equally, those trying to get a foot-hold on the property ladder may need to stump up higher deposits to allay the fears of lenders ."
Interest rates influence mortgage levels
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