The British economy is growing in April but the housing market is weakening

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By Michael Rees Business Correspondent, BBC News Jun 14, 2023 07:14 GMT

Updated 7 minutes ago

Image source, Getty Images

Britain’s economy expanded slightly in April buoyed by strong trade in pubs and pubs, but homeowners and estate agents had a “weak month”, according to official figures.

The Office for National Statistics said the economy expanded by 0.2% in April after contracting in March.

But the Census Bureau said the construction sector had faltered as rising interest rates and mortgage costs made homebuyers more cautious.

One house builder told the BBC that people were “reluctant” to buy homes.

The Bank of England raised interest rates to moderate the rate at which prices are rising – which is known as inflation and is currently at 8.7%.

With interest rates rising and more people getting closer to the end of their fixed-rate mortgage deals, some lenders have pulled some mortgages off the market.

First time buyers are met at higher rates, leaving some rates off the market, and renters also face higher costs due to landlords selling.

Ian Burns, who runs Cameron Homes in Staffordshire, said people were “very cautious” and “taking longer to make decisions”.

“For the last three or four weeks we’ve seen a slowdown in bookings and ultimately, if that doesn’t improve, we have to slow down the build,” he told BBC Wake Up to Money.

“We can’t just keep building houses if we don’t have customers for them.”

Guy Gittens, chief executive of estate agents at Foxstones in London, said the “balance of power” between buyers and sellers had “shifted”. This, he said, means “serious sellers have to be more competitive with prices”.

The Bank of England is widely expected to raise interest rates again when the Monetary Policy Committee meets next week. Borrowing costs were expected to increase from 4.5% to 4.75%.

However, on the heels of stronger-than-expected wage growth in the three months through April – which is feared to keep inflation higher for longer – the Bank’s benchmark rate is now expected to peak at 5.5%.

With interest rates rising, lenders have pulled some mortgage products without any notice.

Chancellor Jeremy Hunt welcomed the figures released on Wednesday from the Office for National Statistics but warned that the UK needed to tackle inflation to “protect household budgets”.

Labour’s shadow chancellor, Rachel Reeves, said the figures represented “another day in the dismal low growth record book for the Conservative government”.

“The facts remain that families are feeling the worst, facing an increasing Tory mortgage penalty and we are falling behind on the world stage.”

In the three months through April, the economy grew by 0.1%.

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