Mortgage approvals at 2018-low in March as housing market remains weak

While mortgage approvals for house purchases in March were affected by the severe weather, experts have said the underlying performance points to the housing market remaining weak as it is pressurised by still limited consumer purchasing power, fragile confidence and likely further gradual interest rate rises following November’s first hike since 2007.

With the current low savings ratio and the prospect of further interest rate rises limiting consumers’ willingness to borrow, analysts at EY said they expect house price gains over 2018 will be limited to a modest 2 per cent.

Howard Archer, chief economic advisor to the EY ITEM Club, said: “House buyers will also likely be concerned about further interest rate hikes over the coming months. While a rate hike in May now seems improbable, the Bank of England still looks more likely than not to increase interest rates later this year.

“The downside for house prices should be limited by the shortage of houses for sale. High employment is also supportive for the housing market while mortgage interest rates would still be at historically low levels if there is a hike in May. The latest RICS survey showed new instructions to sell fell again in March, which was a seventh successive fall. Consequently, average stock levels on estate agents’ books in March remained mired around the survey’s record low.“