Drop in mortgage approvals could mean cooling housing market

28 February 2005
Figures released by the British Bankers' Association (BBA) showing a drop in mortgage approvals have sparked conjecture that the housing market could cool off in the next few months.

The BBA statistics reveal that mortgage approvals - loans agreed but not yet made - fell by 43 per cent in January, equalling the lowest rate in six years.

BBA director of statistics David Dooks confirmed that these were weak figures, even for January, when the market often slows. "The only area of demand holding up is remortgaging, where borrowers continue to find good deals to reduce their borrowing costs," he told the Guardian newspaper.

Mortgage approvals are often used by economists as a good indicator of how house prices may change in the months ahead.

The weak approval statistics point towards a cooling housing market, which could lead to a rise in interest rates.

"It does suggest some of the optimism around the outlook for the housing market may be a little bit misplaced," Alan Castle, an economist at Lehman Brothers, told Reuters.

However, it could also spell good news for mortgage borrowers, as less demand may lead to better deals by banks and building societies.

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