UK construction growth slows as the housing market is hit by mortgage rates

Construction growth in the United Kingdom has slowed as the housing market is hit by mortgage rates. The rate of growth in construction output was 0.3% in the first quarter of 2018, down from 0.7% in the fourth quarter of 2017, according to the Office for National Statistics (ONS). The slowdown was driven by a sharp fall in housebuilding, which offset growth in other areas of construction such as commercial and industrial building.

The slowdown in construction activity comes as the housing market is under pressure from rising mortgage rates. The average two-year fixed mortgage rate has increased from 2.48% in March 2017 to 2.74% in March 2018, while the average five-year fixed mortgage rate has increased from 2.79% to 3.04% over the same period.

The rise in mortgage rates is starting to hit demand for housing, with the number of mortgage approvals for house purchase falling from a peak of over 90,000 in March 2017 to just over 60,000 in February 2018. This fall in demand is likely to lead to a further slowdown in construction activity in the months ahead.

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