UK mortgage approvals fell in August to their lowest level in six months as high interest rates cooled the housing market.
The Bank of England said net mortgage approvals for house purchases fell from 49,500 in July to 45,400 in August and were down by a third from the same month last year.
It was the lowest number of home loans approved by lenders since February this year, and the latest sign that the 14 increases in UK interest rates since December 2021 have undermined the demand for homes.
Separate figures from HMRC showed the number of house sales fell in August compared with a year earlier.
An estimated 87,010 home sales took place across the UK last month, which was 16% lower than in August 2022.
However, the figure was 1% higher than July 2023, indicating that cash buyers, who have funds to buy property without the need for a loan, are preventing the market from a significant collapse.
The estate agent Knight Frank said the ailing property market faced a steeper fall in prices this year than it previously forecast, despite cash buyers propping up the number of transactions.
It said it now expected UK house prices to fall by 7% in 2023, compared with the 5% fall it predicted previously. It expects prices to fall by a further 4% in 2024.
“The cost of borrowing has risen after an exceptional period that followed the global financial crisis, when rates hovered close to zero for more than a decade,” it said. “It’s a return to normality where the journey rather than the destination has been the problem. Anyone buying, selling or remortgaging a property in the last 18 months has faced market volatility caused by the mini-budget and inconsistent inflation data.”
Martin Beck, the chief economic adviser to the EY Item Club, said the Bank of England data showed the housing market remained “in the doldrums”.
He said the likelihood was for weak sales to persist next year even if the central bank began to cut interest rates in response to rising unemployment and the threat of a recession.
“With sentiment around the housing market poor, we doubt a fall in mortgage rates will be enough to trigger much of a revival in activity,” he said.
Net approvals for remortgaging showed a significant decline from 39,300 in July to 25,000 in August, the lowest since July 2012, the Bank said.
A report earlier this week said the number of first-time buyers in the UK had fallen by more than a fifth as the jump in mortgage costs made it too expensive for some people to get on to the housing ladder.
