Mortgage approvals fell to a six-month low in March, a sign homebuyers are becoming increasingly cautious as they start to feel the squeeze on their finances following last year’s Brexit vote.
According to new figures from the Bank of England, the total number of mortgages approved fell by over 2,000 to 122,918.
It is the second month in a row mortgage approvals have fallen.
The Bank’s Money and Credit report showed that mortgage approvals for house purchases fell 1.6% to 66,837 in March, but this is still up on the six-month average of 67,039.
A total of 42,814 loans for remortgage were approved, down from 43,740 the previous month.
This took the total value of remortgaging for the month down by £100,000 to £7.4 billion.
Howard Archer, chief economist at IHS Global Insight, said: “March’s second successive drop in mortgage approvals to a six-month low reported by the Bank of England adds to the evidence that the housing market is being increasingly affected by the increasing squeeze on consumers and their concerns over the outlook.
“We suspect markedly weakening consumer fundamentals, likely mounting caution over making major spending decisions, and elevated house price to earnings ratios will weigh down further on housing market activity and house prices over the coming months. However, a shortage of supply is likely to put a floor under prices.
“Consequently, we believe that house price gains over 2017 will be limited to 2.0% – and there is a very real possibility that it could come in lower than that.”
The dip in approvals comes despite lenders offering record low rates to borrowers.
Only a few months ago it looked as if the era of record low rates could be over, but recent cuts by a number of lenders suggests competition in the mortgage market is heating up again.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “March saw a very slight dip in approvals for loans for house purchase and remortgaging, suggesting the market is ticking along, buoyed by lenders offering rock-bottom rates.
“With HSBC launching the cheapest five-year fix on the market at 1.69% and Yorkshire Building Society introducing a record low two-year discounted rate at just 0.89%, the market is more competitive than ever. It is a good time for borrowers, with lenders keen to attract business from first-time buyers, home movers and those remortgaging.”
House prices fell for the second consecutive month in a row during April, while annual growth has fallen to its slowest rate in nearly four years.
According to the latest Nationwide house price index, monthly house price growth dipped 0.4% in April, the first time house prices have fallen in consecutive months for nearly five years.
On an annual basis, house price inflation was 2.6% – the slowest pace since June 2013.
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