© Reuters. FILE PHOTO: A person walks past the Bank of England in the City of London financial district, in London, Britain, January 26, 2023. REUTERS/Henry Nicholls
LONDON (Reuters) – Mortgage approvals in Britain slumped in December to levels seen during the global financial crisis, Bank of England data showed on Tuesday in a further indication that the housing market is slowing much faster than the consensus predicted.
The BoE said 35,612 mortgages were approved last month, compared with 46,186 in November.
Excluding the COVID-19 pandemic when lockdowns brought the housing market to a standstill, it was the lowest reading since January 2009, when Britain was mired in recession.
A Reuters poll of economists had pointed to approvals of around 45,000 in December.
GRAPHIC: UK mortage approvals fall to financial crisis levels (https://www.reuters.com/graphics/BRITAIN-ECONOMY/LENDING/gdpzqdynqvw/chart.png)
Other indicators also show the housing market is now firmly in reverse gear, after the pandemic and tax breaks spurred a 29% surge in house prices on the official measure.
Tuesday’s figures also showed lending to consumers increased in net terms by 493 million pounds ($607 million), much less than the 1.05 billion pounds forecast.
“Overall, the cumulative downward effect from higher interest rates appears to be starting to weigh more heavily on the economy,” said Ashley Webb, economist at Capital Economics.
“And given the large share of fixed-rate mortgages, this effect is only going to grow throughout this year.”
The BoE is likely to raise interest rates again on Thursday to 4% from 3.5%, according to the latest Reuters poll of economists.
($1 = 0.8120 pounds)
UK housing activity slowing rapidly, Bank of England data shows