According to the Council of Mortgage Lenders, higher interest rates have started to impact on the housing market, and Property Economics believes this is just the start.

Estate agents have begun reporting some deceleration in the rate of house price growth and there have been tentative signs of a modest slowing of price growth in some of the major indices.

There has been a rise in re-mortgage approvals in the early part of this year, although loan approvals for house purchases were 5% below that of late 2006. However, according to Capital Economics, UK lenders approved 311,000 new mortgage loans in February 2007, with a combined value of £33.9bn. These were 6.1% and 18.7% respectively higher than in February 2006. While mortgage approvals have cooled, they remain well above their long term average of 100,000 per month.

“What’s more, the normal lags in the house buying process mean that the recent interest rate rises will not have had their full impact on mortgage demand”, says Kelvin Davidson of Capital Economics. “Overall, we continue to expect the housing market to cool as 2007 progresses with mortgage approvals moderating to about 100,000 per month towards the end of the year.”