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UK mortgage approvals hit six-month low

UK mortgage approvals fell in August to their lowest level in six months as high-interest rates cooled the housing market.

The Bank of England said net mortgage approvals for house purchases fell from 49,500 in July to 45,400 in August and were down by a third from last year.

It was the lowest number of mortgage loans approved by lenders since February this year, and the latest sign that the 14 increases in UK interest rates since December 2021 have undermined the demand for homes.

Separate figures from HMRC showed the number of house sales fell in August compared with a year earlier.

An estimated 87,010 home sales occurred across the UK last month, 16% lower than in August 2022.

However, the figure was 1% higher than July 2023, indicating that cash buyers, who have funds to buy property without the need for a loan, are preventing the market from a significant collapse.

The estate agent Knight Frank said the ailing property market faced a steeper price fall this year than it previously forecasted, despite cash buyers propping up the number of transactions.

It said it now expected UK house prices to fall by 7% in 2023, compared with the 5% fall it predicted previously. It expects prices to fall by a further 4% in 2024.

“The cost of borrowing has risen after an exceptional period that followed the global financial crisis, when rates hovered close to zero for more than a decade,” it said. “It’s a return to normality where the journey rather than the destination has been the problem. Anyone buying, selling or remortgaging a property in the last 18 months has faced market volatility caused by the mini-budget and inconsistent inflation data.”

Martin Beck, the chief economic adviser to the EY Item Club, said the Bank of England data showed the housing market remained “in the doldrums”.

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