Tag: credit criteria

The latest mortgage approval numbers from the Bank of England continue to demonstrate the fragility of the UK housing market and, in particular, waning levels of activity. The 47,474 approvals in September was the lowest number since February. The downward momentum in approvals has gained pace in recent months. The number of approvals in Q3 was 2.9% lower than in Q2 and was 11.5% lower than in Q3 of last year. All of this provides evidence that housing demand is weakening.

Tight credit conditions have affected the supply of mortgages for some time and, as a consequence, negatively impacted on the number of house buyers. This is likely to be especially true for potential first-time buyers who have no housing equity with which to help purchase property. But, the marked downward momentum in mortgage approvals is reflecting a weakening in housing demand.

So what explains this weakening of housing demand? In part, it is likely to be current economic conditions. But, expectations of future economic conditions are crucially important in determining activity levels in the housing market. With concerns about future economic growth it would be no surprise if households are feeling more than a little cautious about their spending plans and about their household finances. Economic uncertainty amongst households does not bode well for activity levels in the housing market. If this line of thinking is right we can expect mortgage approvals numbers to remain subdued for some time to come.


Drop in mortgages sparks concerns over house price falls The Herald, Ian McConnell (30/10/10)
Housing dip feared as mortgage approvals stall Guardian, Mark King (29/10/10)
UK mortgage approvals decline Irish Times (29/10/10)
Net mortgage lending slumps to just £112 million Independent, James Moore (30/10/10)
Mortgage approvals lowest since Feb Reuters (29/10/10)


Mortgage approval numbers and other lending data are available from the Bank of England’s statistics publication, Monetary and Financial Statistics (Bankstats) (See Table A5.4.)


  1. What variables do you think will affect the demand for mortgages?
  2. What variables do you think will affect the supply of mortgages by lenders?
  3. What do you understand by housing and mortgages being complementary products? Why might the complementary relationship between housing and mortgages be stronger for first-time buyers?
  4. If housing demand weakens, would we expect house prices to fall? Are there circumstances when a weakening of demand might not translate into lower house prices? Illustrate your answer using demand and supply diagrams.