Separate data on Thursday from the Bank of England showed mortgage approvals fell sharply in April. Mortgage approvals for home purchase fell to 48,690, a 26pc drop on a year earlier and down from 51,488 in March. Meanwhile, gross mortgage lending fell to £17bn, down by 14pc since March and the lowest level since July 2021.
Analysts had expected the number of mortgage approvals to rise to 53,000 following a steady decline in mortgage rates in recent months.
Andrew Wishart, senior economist at Capital Economics, said: “Even with mortgage rates below 5pc, many would-be buyers were priced out of the market.”
Capital Economics warned that based on the current trajectory, the number of home loans agreed this year will fall to the lowest level recorded since 2008.
It forecast that mortgage approvals will fall from 752,000 in 2022 to 540,000 this year, around half the number agreed in 2021 during the peak of the pandemic property boom.
Higher than expected inflation data last week has triggered large jumps in gilt yields and markets’ expectations for future borrowing costs, which are pushing up mortgage rates.