Is the mortgage market slowing down?

The latest figures relating to mortgage lending for last month have indicated that there could be a slow down in the mortgage market, with the number of people taking out a mortgage falling to its lowest point in two years, according to the British Bankers' Association.

In January 2006 just over forty five thousand people took out mortgages. However, for January 2007, this figure has fallen to just over thirty seven and a half thousand people.

Despite the fall in the number of people that took out a mortgage, figures also show that the overall amount borrowed in terms of mortgage loans has risen, and from the fourteen and a half billion that was borrowed in January 2006 the figures has risen by fifteen percent to just over sixteen and a half billion in January this year.

The rise in the amount borrowed compared to the number of people that have actually taken out this type of loan reflects the steep rise in property prices in the UK, with people needing to borrow more in order to afford to buy a property.

The fall in the number of mortgages being taken out could be contributed to a number of factors. This includes the three interest rate rises that have been enforced by the Bank of England since August 2006, which has taken the interest rate from four and a half percent to five and a quarter percent. Another possible contributory factor is that many people now simply cannot afford to take out a mortgage due to the cost of purchasing a property, with many first time buyers left out in the cold or having to face getting into debt for over five decades.

The Director of Statistics at the British Bankers' Association stated: "January saw a continued stable demand for mortgages. Actual borrowing on mortgages remains strong compared with this time last year, so the impact of higher interest rates has yet to feature. Prudent repayments, particularly on credit card accounts, are keeping the unsecured credit picture very subdued."

Tom Smith
3rd March 2007

 

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