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Option Homes Ltd - News- Mortgage Approvals Hit 18-Month Low

Mortgage Approvals Hit 18-Month Low

Date Added 07/09/2016

The recent month of July saw mortgage approvals fall to an eighteen-month low due mostly to the result of the referendum on whether Britain remains in the EU. The Bank of England revealed that the number of mortgage approvals by both banks and building societies fell by 3,240 from the previous month of June.

The drop means the total amount of approvals during July was 60,912, down from 64,152 in June, and represents the lowest monthly total since the first month of 2015. The drop seems to signify a trend developing since the recent peak of around 73,000 approvals in February, with the Brexit vote ensuring the downward trend continued. It is believed by certain industry experts that these drops in mortgage approvals will likely lead to a significant decrease in average house prices over the next year or so.

Estate Agents See Buying Enquires Fall

Recently the Royal Institution of Chartered Surveyors revealed that estate agents registered with them had reported a dramatic decrease in the numbers of buyer enquiries. That drop in buyer enquiries was the fourth month on month decrease in a row, and has led to estate agents losing hope of a big turnaround any time soon.

There have been a number of reports pointing a finger at the Brexit vote, with the prospect of Britain leaving the EU and the uncertainty that it has plunged various economic sectors of Britain into being the main cause behind the decrease in buyer enquiries. Indeed, various economy experts have already predicted that the numbers of buyer enquiries as well as mortgage approvals will continue to fall over the remaining months of 2016.

House Prices Could Fall by As Much As 8%

The Chief Economist at IHS Global Insight (an economics consultancy organisation), Howard Archer, believes that house prices could fall by 3% over the remainder of this year, and a further 5% in 2017, culminating in a reduction of 8% in total.

Mr Archer said, `We believe housing market activity is likely to be limited over the coming months and prices will weaken, as heightened uncertainty following the UK`s vote to leave the EU weighs down on consumer confidence and a willingness to engage in major transactions.

`According to the Halifax, the house-price-to-earnings ratio reached 5.70 in June, which was its highest level since October 2007, before easing back to 5.63 in July. This is well above the long-term average of 4.16. Furthermore, the more uncertain and weakened outlook for the economy could make mortgage lenders tighten their lending standards, and possibly even look to increase their margins on mortgages.`

While these bleak predictions have yet to come to fruition, it`s worth paying attention to such statements especially if you are (or were) planning on selling a property within the next twelve months or so. Buyers, of course, generally welcome a lowering of prices so it remains to be seen if the overall impact will be negative or positive.
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