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UK Housing Market Boom Coming to an End

Housing-Market / UK Housing May 31, 2007 - 10:33 AM GMT

By: Phillipa_Green

Housing-Market Data released by the Bank of England confirms a continuing drop on mortgage approvals as the number of loans approved for house purchases in April were 107,000, for remortgaging 98,000 and for other purposes 72,000 were all lower than in March. The numbers are all down significantly on the start of the year.


Four rate rises since August 2006, taking Interest rates to 5.50% are starting to bite. With prospects of at least 1 more rise, the pressure continues to mount on the UK housing market during the traditionally strong summer demand period. However some market analysts suggesting 6% interest rates are failing to take into account that by that time a weak housing market will have a deflationary effect on the UK economy and therefore make the rate rise to 6% less likely.

Other signs of an end to the boom being in sight, are the glut of flats on the market and more to be completed and come on stream as oversupply hits the market. This is very similar to the lead up to the last boom and bust in the late 80's. The Buy to Let sector is increasingly vulnerable to speculators rushing for the exit due to higher interest rates making potential profits reliant on capital gains as rents increasingly are unable to cover costs. This could cause a sharp drop in the UK housing Market over a short time period. The Australian Housing Market experienced a similar sharp 6% slump.

The expectations is of an economic slowdown later this year as world wide inflationary pressures ensure that Interest rates remain in an upward trend across the world and therefore make any prospects of interest rate cuts highly unlikely despite a housing slump, much as the US has experienced over the last 12 months.

By Phillipa Green

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