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UK mortgage approvals drop off as market cools

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UK mortgage approvals drop off as market cools
The housing market has been red hot in 2021. Photo: Nathan Stirk/Getty

New data has shown a further cooling of the UK housing market, as mortgage approvals dropped in October from the month before.

Mortgage approvals for house purchase fell to 67,200 in October from 71,900 in September, close to the 12-month average up to February 2020 of 66,700.

Recent property transaction statistics from HMRC had also showed there had been an enormous 52% on month drop off in property sales following the withdrawal of the stamp duty holiday at the end of September.

"Not only will people now be less inclined to move to a new house due to the stamp duty holiday no longer being in play there is also the spectre of increasing interest rates looming. As inflation continues to run riot a hike in interest rates is heavily touted to be announced at the next Monetary Policy Committee meeting,"said Heather Owen, financial planning expert at Quilter.

The cool off is a testament to how busy the housing market has been over the past year. According to research released today, 2021 is set to be the UK’s busiest property market in 14 years in terms of property transactions, with the pandemic leading to a search for homes with more space.

Zoopla’s latest house price index showed that by the end of the year, one in 16 homes will have changed hands, making it the busiest property market since 2007, even as supply remains constrained.

Read more: UK consumer credit surges to £700m in October

The high demand is boosting the rate of annual house price growth, which is tracking at 6.9%, up from 3.5% growth in October 2020 and running at a near seven year high

However, the growth marks a slight easing back from the above 7% growth recorded in August and September.

According to the Bank of England (BoE), net borrowing amounted to £1.6bn ($2.1bn) in October, the lowest since July 2021.

Consumers borrowed an additional £700m in consumer credit, on net. Meanwhile, the effective rate on new personal loans increased to 6.27% in October, the highest since March 2020 but still below the January 2020 level.

Households’ net flow into deposit accounts fell in October to £5.5bn. The effective interest rate paid on individuals’ new time deposits with banks and building societies rose to 0.36% in October.

The BoE said large businesses borrowed £2bn in loans from banks in October, whilst small and medium sized businesses repaid £1.6bn.

Watch: Will Interest rates stay low forever?

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