The number of mortgages being approved by banks and building societies is at its lowest in 21 months.
According to the latest figures from the Bank of England, the number of mortgages approved fell to 60,058 in August, down from 60,925 the previous month.
Mortgage approvals for house purchases were down 16.0% from August last year.
The number of approvals for remortgaging was 40,225, down from 42,597.
The amount lent out for house purchase £10.4 billion, down from £10.5 billion in July.
Mortgage approvals for house purchases have progressively slowed following a boom in borrowing in the run-up to April’s stamp duty hike as buyers brought forward transactions to beat the deadline.
The housing market has also been hit by uncertainty over the impact of the EU referendum, with many buyers adopting a more cautious approach and putting off purchases.
Economists believe housing market activity is likely to slow in the coming months and prices will weaken as uncertainty following the Brexit vote continues to weigh on consumer confidence.
To help boost growth the Bank of England has cut interest rates from 0.50% to 0.25% – the lowest on record. It is the first interest rate cut since 2009, when the financial crisis was at its peak.
Jeremy Duncombe, director at Legal & General Mortgage Club, said: “These mortgage approval figures are the first we’ve seen since the Bank of England made its historic decision to cut the Base Rate to 0.25%. The market often experiences a lull in August as fewer people look to move home or remortgage over the summer months, so these numbers are no real surprise.
“Unsurprisingly, a significant amount of the activity last month was down to remortgagers. The low interest rate environment we are currently witnessing is the perfect time for borrowers to take stock of their existing mortgage deals, and speak to an adviser to ensure they are on the most competitive product available to them.
Richard Pike, Phoebus Software sales and marketing director, says “Surprisingly the figures today from the Bank of England are in stark contrast to the upbeat prediction for mortgage lending in August from the CML last week. This paints a very different picture that perhaps the seasonal lull had more of an effect than was at first thought.
“However, with reports of more properties coming onto the market in the three months since the referendum, lenders passing on the cut in interest rates and an improvement in consumer confidence it is likely that we will see some improvement as we head into Autumn.
“There remain two worries of course, the first being overall supply and the second is affordability. While caution remains the watchword wages are unlikely to keep pace with even a small amount of increase in house prices, which makes getting onto the property ladder a harder feat, especially for first-time buyers.”
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