UK mortgage approvals fall to lowest since January as rate hikes bite

LONDON (Reuters) - British lenders approved 43,328 mortgages in September, the lowest number since January, the Bank of England said on Monday, in a further sign of how rising borrowing costs are slowing the property market.

Economists polled by Reuters had forecast 45,000 loans for home purchases would be approved.

Net approvals for remortgaging fell to around 20,600, the lowest since January 1999, and there was a net repayment of 940 million pounds ($1.14 billion) in mortgage debt in September, the lowest net mortgage borrowing figure since April this year.

The BoE raised interest rates from 0.1% to 5.25% between December 2021 and August this year, driving up the cost of mortgages as it sought to tackle high inflation. It kept rates on hold in September and is expected to do so again on Thursday.

Some economists are worried that the increased cost of borrowing will push Britain into a recession.

"Overall, higher rates are gradually working and this supports our view that the Bank has finished hiking interest rates," Ashley Webb, an economist with Capital Economics, said.

"Looking ahead, our forecast that the Bank won't cut interest rates until late next year suggests that lending will remain weak over the next few quarters."

Monday's data from the BoE showed net borrowing by consumers fell to just under 1.4 billion pounds last month from almost 1.7 billion pounds in August. But the pace of growth in consumer credit over 12 months was its fastest since late 2018 at 8.0%.

($1 = 0.8245 pounds)

(Writing by William Schomberg; editing by David Milliken)