Mortgage withdrawals 'magnify' housing market woes

Experts are warning that the slump in mortgage approvals recorded last month is set to destabilise an already-shaky housing market.

The British Bankers'' Association has released figures showing that the number of mortgages issued in September fell dramatically year-on-year, down 12.1 per cent to 160,879.

Though annual house price growth of 8.7 per cent has bolstered the value of individual mortgages, the aggregate value of the market still fell 5.8 per cent to £18.1 billion.

David Stubbs, senior economist at the Royal Institution of Chartered Surveyors, said higher interest rates were the "root cause" of worsening slowdowns in the housing market.

He added: "Their impact is being magnified by the withdrawal of some mortgage products by banks and building societies as the problems in financial markets persist.

"The market should to continue to weaken as we approach 2008 and price growth should stall throughout the year."

The International Monetary Fund last week estimated that UK property is 40 per cent overvalued and can expect to undergo a "price correction" in the coming months.

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