Mortgage slump fuels slowdown fears

MORTGAGE lending fell by more than a third in April, stoking fears of a slowdown in house prices.

Total lending for house purchases slumped to £4.1bn, from £6.4bn in March, as the impact of higher interest rates kicked in.

Data from the Bank of England showed mortgage approvals fell to about 66,000 over the month, compared with 70,700 in March.

The number of loans granted was well beneath economists’ expectations, and below the average for the half-decade before the pandemic.

Nicholas Farr, of Capital Economics, said: “It seems as though some of the heat is starting to come out of the housing market. He added that the slowdown “may be an early sign of higher mortgage rates starting to take effect”.

Mr Farr said the average new mortgage rate has risen by about a third of a point, from 1.5pc in November to 1.82pc in April.

Hina Bhudia, from estate agent Knight Frank, said: “There is a real sense of urgency among many borrowers who sense they must act soon or reassess what they can afford.”

The Bank’s Monetary Policy Committee is expected to raise rates several more times this year, further pushing up the cost of borrowing.

Gabriella Dickens from Pantheon Macroeconomics said measures such as internet search activity indicated the slowdown would continue.

She said: “The combination of falling real disposable incomes, surging mortgage rates and low consumer confidence suggests mortgage approvals will remain below their 2015-to-19 average in the second half of this year.”

The Bank’s data also showed consumers took on a further £1.4bn in consumer credit during April, suggesting households are borrowing money to offset the rising cost of living.