Mortgage Demand Begins to Slow

Friday, August 27 2004

Mortgage loan approvals fell by 20 percent in July, indicating a slowing down of the housing market, research from the British Bankers? Association (BBA) has shown.

Approvals for new mortgages dropped from 89,000 at a value of £8 billion in June to a total of 71,000 mortgages with a value of £10.4 billion in July, showing that the demand to take out mortgages is slowing down.

Mortgage loans are also down on last year, with the number of loans approved for house purchase more than 20% lower in June 2004 than in June 2003.

While gross mortgage lending was actually up by £5.7 billion in July, the BBA indicated that the rise was mainly down to homeowners taking advantage of the intense competition in the re-mortgaging and equity withdrawal loan markets and changing the financial position of their properties.

David Dooks, BBA director of statistics, said: ?At this time of year, when demand is usually strong, loan approvals data, which indicate the short-term path of future lending, were surprisingly weak, with loans for house purchase particularly downbeat.

?Although we saw a similar trend this time last year, we were surprised by the downturn, which was larger than could be expected under any circumstances. We’ll have to wait until next month’s figures to see if this is a long-lasting trend. If people are now more cautious and the downturn reflects a mood change towards the housing market, we will see more decreases over coming months.?