In a reaction to the recent interest rate hikes, records show that approvals for new home purchases in Britain fell by 12 percent in the month of March 2007.
Then British Bankers Association has drawn comparisons between the number of approvals for home purchase loans in March 2006 and March 2007. In March 2007 the total number was 75,098 loans approved. This was 10,000 less than that in March 2006. The current month would be the fourth consecutive month that the approvals have fallen.
According to Howard Archer, chief UK economist at Global Insight, “The BBA data indicates that the housing market activity is now gradually coming off the boil as higher interest rates and elevated house prices increasingly squeeze new buyers out of the market”.
With the Bank of England raising the interest rates three times since August 2006 to 5.25 percent, more increases are expected. It is anticipated that another increase is coming within the next week and then one more is expected in coming summer.
Inspite of the anticipated increase the recent house prices in London and south-east England are still going strong. In fact a recent report in by property consultant Hometrack states that the home prices in Britain climbed in February at their fastest annual rate since June 2003.
As per the figures quoted by the BBA the underlying net mortgage rose by 5.1 billion pounds in April 2007. This was below the recent average of 5.5 billion pounds. Annual growth in the net mortgage lending remained steady at around 14 percent.
A good indicator of the pace of house price inflation over the last year would be the average house loan values. In March 2006 the average value of a loan for the purchase of a house was 150,800 pounds. In March 2007 the value stood at 134,300 pounds.
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