BoE: Mortgage approvals down in October

Thursday, 29 November 2007 12:00 AM

Mortgage approvals fell to 88,000 during October, according to figures released by the Bank of England today.

This is down from the 100,000 approvals in September and the six month average of 109,000 - providing more evidence for a slowing housing market.

Earlier today Nationwidebuilding society figures revealed average house prices were down by 0.8 per cent.

Growth in total net lending secured on dwellings also fell during October, down to £7.3 billion.

This was the lowest level since July 2005 and was down from £9.5 billion in September. It was also significantly below the £9.0 billion monthly average for the previous six months.

The falls mean the twelve-month average growth rate has fallen to 10.5 per cent, down from 10.9 per cent last month.

The three-month annualised growth rate also fell, by 0.7 percentage points to 9.2 per cent.

The number of remortgages was also down, falling from 98,000 in September to 87,000 last month.

The figures suggest the housing market is about to enter an extended period of slowing growth.

"Slowing housing demand is expected to steadily feed through to dampen house prices over the coming months. Consequently, we expect annual house price inflation to fall back markedly over the next few months," said Howard Archer, chief European economist, Global Insight.

However, there could be good news for borrowers, as the slowdown could mean a cut in interest rates in the near future.

"The growing evidence of a significantly slowing housing activity and prices boosts the case for the Bank of England to cut interest rates by 25 basis points to 5.50 per cent in December.

"The decision currently looks balanced on a knife edge," concluded Mr Archer.

This view was supported by the Royal Institution of Chartered Surveyors (Rics).

"Today's data will strengthen the hand of the doves of the MPC ahead of next week's meeting and could just swing the balance in favour of an early cut in interest rates," said Simon Rubinsohn, Rics chief economist.

"This would provide some welcome relief particularly for first time buyers who are feeling the full force of the credit crunch as lenders become more discriminating in their lending activity."

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