LONDON: Mortgage approvals in the U.K. have declined in December, Bank of England figures showed, a clear sign that higher borrowing costs are beginning to impact the housing market.
The figures released by the bank Tuesday showed that the number of approvals for house purchases in December fell to 113,000 from 129,000 in November. This is the lowest figure since April 2006, when there were only 107,000 approvals.
These figures notwithstanding, net mortgage lending rose to 10.6 billion pounds during December from 10 billion in November. This is the highest since records began in April 1993.
The data covers Bank of England's rate increase in November, but does not include the surprise hike in January when the rate reached a five-and-a-half-year high of 5.25 per cent.
The central bank also said the total value of mortgage approvals, including remortgaging, dropped to 29.8 billion pounds in December from 33.7 billion pounds in November. Unsecured borrowing constituting borrowing through credit cards, loans and overdrafts remained relatively steady in December.
Analysts reacted to the figures saying this may be sign that the housing market is cooling. They pointed out to recent house price surveys, which showed there is a slowing in housing market. In the most recent survey, Nationwide Building Society said Tuesday house prices rose at a subdued rate of 0.3 per cent on the month in January, which is the weakest rise since May 2006.
Analysts felt there may not be any reversal possible in the year ahead as only higher interest rates from the Bank of England can be expected.
Nationwide also said prices increased at an annual rate of 9.3 per cent in January, down from 10.5 per cent in December.
Nationwide's chief economist Fionnuala Earley said the number of newly agreed sales is rising more slowly and the length of time properties are on the market seems to be getting longer. Also new buyer inquiries recorded their first fall in 19 months.
