UK mortgage approvals declined to the lowest level in more than two years in December as the cost of living crisis and the rising interest rate took its toll on the property market.
The number of mortgages approved for house purchases fell to 35,600 in December from 46,200 in November, data from the Bank of England revealed Tuesday.
The fourth straight month of decline took the approvals to the lowest since May 2020 and they also remained well below economists’ forecast of 45,000.
The collapse in property demand makes further large falls in prices inevitable in the coming months, Capital Economics economist Andrew Wishart said.
The ‘effective’ interest rate, which is the actual interest rate paid on newly drawn mortgages increased by 32 basis points, to 3.67 percent in December.
At the same time, secured lending fell more-than-expected to GBP 3.2 billion in December from GBP 4.3 billion in November, data showed. The expected level was GBP 4.0 billion.
Consumers borrowed an additional GBP 0.5 billion in consumer credit compared with GBP 1.5 billion in November.
Businesses borrowed GBP 1.9 billion in December compared to GBP 1.5 billion a month ago. Borrowings of large firms increased to GBP 2.7 billion, while small and medium sized businesses repaid GBP 0.8 billion.
The Bank of England has raised its interest rates over the last nine consecutive meetings. The bank rate has reached 3.50 percent, the highest level since October 2008.
The bank is expected to hike its rate again by 50 basis points on February 2.
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