Mortgage approvals fell unexpectedly in March
Economists had expected mortgage approvals to increase to 34,000 in March but instead the latest figures from the British Bankers Association show they actually fell, to 31,888.
This was significantly lower than 32,840 in February and the 25-month high in January, when 38,233 mortgages were approved.
The slump in March represents an 11-month low and suggests an underlying weakness in the housing market according to economists.
The figures for January and February were boosted by an increase in first-time buyer activity prior to the end of the stamp duty holiday on lower priced houses.
Dr Howard Archer, chief European and UK economist for London-based IHS Global Insight, said: “March’s 11-month low in mortgage approvals reinforces our belief that house prices are more likely than not to drift downwards over the coming months in the face of soft economic fundamentals and low consumer confidence.
“Specifically, we expect house prices to fall by around 3 per cent by the end of 2012.”
In related news, new research by Moneyfacts.co.uk suggests that lenders are reducing the rates on long-term mortgages.
The study found that the average rate of a five year fixed rate mortgage has fallen from 5.59 per cent to 4.86 per cent in the past year.
The lower rates are designed to attract borrowers with tracker deals linked to the low base rate and mortgages tied to standard variable rates.
Many lenders have announced plans to increase their standard variable rates from 1 May.
Louise Holmes, spokesperson for moneyfacts.co.uk, said: “Average rates for five-year fixed-rate deals have been falling steadily for the past couple of years.
“Fixed-rate mortgages offer the reassurance of a set monthly payment and can be beneficial when planning financial budgets as the repayment amount remains the same over the duration of the term.”