Mortgage approvals slow

There were 193,850 all purpose mortgages approved in June, eight per cent less than the same month during 2005, although the average loan approved for house purchase was £159,600, 16 per cent higher than last year, according to the British Bankers' Association.

Although June saw gross mortgage lending rise to £21.5 billion, its highest ever level, the figure was inflated by re-mortgaging activity and was actually only five per cent higher than a year earlier, highlighting a slow down in mortgage approvals in real terms, the BBA explained.

Underlying net mortgage lending rose by £5.4 billion during the month, down from £5.9 billion in May but inline with the recent average. The annual net mortgage lending growth rate, meanwhile, remained at around 14 per cent.

David Dooks, director of statistics at the BBA, said: "Although the trend in net mortgage lending is being maintained, approval numbers for house purchase are well down on this time last year, suggesting that market demand may be reacting to higher mortgage costs."

The latest house price survey from Nationwide would appear to support this assertion – prices grew by just 0.1 per cent in July, cutting the annual rate of growth from 11.1 per cent to 9.9 per cent.

With house prices expected to slow in the next half a year, higher interest rates are finally starting to tighten consumer finances and reduce the demand for new mortgages.

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