Further evidence confirms that the housing market will cool somewhat in 2007

It is claimed that new mortgage approvals have shown their lowest increase since April, fuelling rumours that the housing market is fast approaching its peak in the wake of rising borrowing costs.

Towards the end of last year all sorts of surveys and research depicted strong and steady demand and healthy house price inflation. Now, however are all the interest rates starting to take effect?

New mortgage approvals for December were 113,000. This is a decrease of over 12% from the 3 year record high of  29,000 in November. It is new mortgage approval figures which are often used to help predict future movement within the housing market.

According to an economist from Investec, there could be evidence of a ‘cooling off’ in the housing market. He says, “Mortgage lending was robust but that lags approval numbers.”

Furthermore, the Halifax and Royal Institution of Chartered Surveyors say their December house price surveys support the theory of a slower housing market.

Nationwide have also released this week their house figures for January rose at only 0.3% which is their weakest figure since May 2006.

So what lies ahead then? Well, it is generally believed that the bank of England raised rates again this month in an effort to combat inflation which reached 3% in December.

A property economist at Capital Economics says he believes today’s ‘softer house price data’ will continue throughout 2007 as a direct result of the after-effects of higher interest rates. He also says, ”The further rate rise that we expect in the near future will only add to the downward pressures on the housing market.”