Demand for home loans fall by a fifth
The number of homebuyers taking out a mortgage has fallen by nearly a fifth in the last six months, figures have revealed.
Just 107,000 were granted a home loan in April, the lowest level of approvals for a year, according to the Bank of England.
It suggests that increasing numbers are being turned off the idea of moving into the property market by rising interest rates.
In further evidence that the market is cooling, separate figures yesterday showed that house price inflation is slowing.
Prices have been soaring by nearly £50 a day over the last year to an average of £181,584.
They rose by just 0.5 per cent in May compared with 0.9 per cent in April, Nationwide said.
The four interest rate rises since last August are causing misery for many homeowners - and prospective misery for many more.
About 2.5million face a jump of as much as £200 in their monthly repayments when their fixed rate deal comes to an end this summer.
Many fixed their mortgage at around 5.3 per cent in 2004 but their interest rate will rise to about 7.5 per cent if they do not switch to a cheaper deal, according to the comparison website MoneyExpert.com.
Howard Archer, chief UK economist at forecasters Global Insight, said: 'The data adds to the growing evidence that housing market activity is now coming off the boil.'
Nicholas Leeming, of Propertyfinder.com, said: "Evidence is piling up that the housing market is cooling. First, confidence began to slip as interest rates rose.
"Second, evidence of slowing price growth emerged. Third, it is clear that appetite for mortgage borrowing is waning too."
Vince Cable, the LibDem treasury spokesman, said: "The concern is that this slowdown could be part of a much messier process in which house prices start to fall sharply as growing numbers of people are caught up in negative equity and arrears problems, as in the early 1990s."
Repossessions are already on their way up, rising by 65 per cent to 17,000 last year.
Fionnuala Earley, Nationwide's chief economist, dismissed fears of a crash but urged homebuyers to think twice before taking out a mortgage.
She warned there is an 80 per cent chance of interest rates - already at a six-year high of 5.5 per cent - rising to 5.75 per cent this year.
Other economists are even more pessimistic, predicting they will hit 6 per cent.
The warning came the day after Land Registry figures showed prices are falling in four of the nine regions of England and Wales outside London.
But massive City bonuses continue to fuel a boom in the capital which is distorting the overall picture. More than 60 per cent of homes sold for £1million or more are in London.
