Number of home loans down

The latest set of figures from the British Bankers’ Association show that the number of people taking out mortgages has fallen. Nevertheless, economists say it is still too early to say that the UK housing market has cooled dramatically.

In July there were 66,965 housing loans taken out. It is the lowest figure for three months, but experts say it the fall had actually been less than expected, and the Bank of England may consider it not sufficient to prevent it from raising interest rates to 6% in the coming months.

Mortgage approvals in July numbered 182,950 for a value of £21.5bn, which was 6% lower than in June. Compared with 2006, the number of people remortgaging was up by 12%, which is seen to be an indicator that the huge number of households coming off two-year fixed rate mortgages has begun.

David Dooks, statistical director at the BBA, said: “With customers seeking to replace deals or fix their mortgage costs, increased remortgaging activity boosted the banks’ lending in July. Lower approvals volumes simply reflected the seasonal patter, so we expect the stable trend in the banks’ lending to continue over the next couple of months.”

There have been other indicators recently that the housing market has gone past its peak. Activity and price rises have both slowed down. According to Hometrack, prices stalled in August, and the Royal Institution of Chartered Surveyors (RICS) said there had been a drop in demand for housing.

It does seem that the fall in approvals in July suggests that households are having to realign their thinking following the raft of interest rate rises. Coupled with the RICS figures there does seem to be a shift towards more moderate housing demand.

In addition, BBA figures showed that credit card borrowing was down by £82m in July.