Mortgage lending in Britain dropped last month before the Bank of England raised interest rates
Mortgage lending in Britain dropped last month before the Bank of England raised interest rates above the level set since the financial crisis, banking industry figures showed.
The industry body UK Finance said the number of mortgages approved for new house purchases dropped by 4.3 per cent in July to 39,584 compared with the same month a year ago. City economists had forecast around 40,700, suggesting a renewed slowdown in the housing market.
The Bank of England raised the cost of borrowing earlier this month, making it more expensive for prospective homeowners to secure a mortgage, while concerns about a no-deal Brexit are also discouraging buyers. Analysts said the rise in rates to 0.75 per cent from 0.5 per cent could further weigh on demand for mortgages.
The chief UK economist at consultancy Pantheon Macroeconomics, Samuel Tombs said the figures showed the housing market was fundamentally slowing, adding that the hike by the Bank of England will unnerve many buyers.
The latest snapshot of the mortgage market comes as British households face sluggish wage growth and higher levels of inflation since the Brexit vote.
A director at UK Finance, Peter Tyler said the broader economic outlook remains mixed, with households continuing to see their incomes being squeezed by rising inflation.
Earlier this month, the Royal Institution of Chartered Surveyors reported broadly flat new-buyer enquiries and newly agreed sales in July. Some surveyors said Brexit was restraining sellers, while hot weather and the school summer holidays also had an impact.
House price growth across the country has been slowing in recent months, with property values in London falling for the first time since the financial crisis. The Office for National Statistics said the northeast is the only region where house prices are yet to surpass their 2008 levels.
While the price of a property in England has grown by 25.3 per cent between 2007 and 2017, the northeast has fallen by 7.1 per cent over the same period. Statisticians said there was a larger supply of homes versus the rest of the country, while falling numbers of people between the ages of 16 to 64 had weighed on the demand for homes.
There is a distinct divide between the north and south of the country when it comes to house price growth in relation to wage growth, which has become even more pronounced since the financial crash, said Tanya Jackson of Yorkshire Building Society.