House purchase approvals in the U.K. are likely to strengthen a little in 2018 against the backdrop of the recent rate hike by the Bank of England for the first time in a decade, Hansen Lu, a property economist at Capital Economics, said.
Mortgage approvals for house purchase fell for the second straight month by 2.6 percent in October, data from the UK Finance showed on November 24.
On a yearly basis, house purchase approvals decreased 3.0 percent.
However, the data also revealed that remortgaging surged, as existing borrowers rushed to lock in record low rates ahead of November’s rate rise, the economist observed.
“This surge almost certainly reflects monetary policy expectations, with homeowners having rushed to lock in a low interest rate ahead of the widely anticipated rate hike in November,” Lu added.
Capital Economics also noted that other factors outweighed the falling trend of mortgage approvals.
One such factor may have been the risk averse behavior from banks, who have been wary of risks arising from both the economic outlook and high house prices.
This resulted to a cut in high LTV lending, as well as tighter credit criteria, in recent months.
After all, the prospect of higher interest rates in the future, combined with already very high house prices, may have put off some buyers from purchasing.
“In the near term, house purchase approvals are unlikely to rise meaningfully,” the economist said.
The recent data from RICS suggested that new buyer inquiries and newly agreed sales are falling at a fairly brisk pace.
“That said, even after factoring in rate hikes, interest rates will remain low by past standards, and the economic backdrop is set to improve,” Capital Economics pointed out.
In short, we expect mortgage approvals to strengthen a little in 2018, Lu concluded.
The material has been provided by InstaForex Company – www.instaforex.com
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