In September, British lenders approved the lowest number of mortgages since January, according to a report from the Bank of England. The figure stood at 43,328, down from 45,400 in August, representing the third consecutive monthly decline. The decrease in mortgage approvals has raised concerns about the state of the housing market.
The report also revealed that net approvals for remortgaging reached their lowest level since January 1999, with 20,600 approvals recorded in September. This suggests that many homeowners are choosing to stay with their existing lenders due to affordability concerns.
Furthermore, net borrowing decreased to just under £1.4 billion ($1.7 billion) in September, down from £1.7 billion in August. The decline in borrowing reflects the current sentiment surrounding the mortgage and property market, which is not particularly strong.
Gary Bush, a financial adviser at MortgageShop.com, commented on the mortgage approval figures, stating, “These dire mortgage approval figures from the Bank of England were always on the cards. The sentiment surrounding the mortgage and property market isn’t especially strong right now and these figures reflect that.” He also highlighted that the low remortgage numbers indicate the lack of choice for many individuals who are unable to switch lenders due to affordability constraints.
The Bank of England has been raising interest rates continuously since November 2021, with the most recent hike occurring on August 3. This brought the benchmark rate to 5.25%, the highest level in 15 years. The objective behind the rate increases is to combat high inflation. However, the rising cost of mortgages as a result of these rate hikes is impacting home sales.
A recent report by real estate firm Zoopla predicts that home sales in the UK are likely to reach the lowest level in over a decade due to soaring mortgage costs. Many potential buyers are being priced out of the market, leading to a decrease in demand.
The Bank of England opted to keep rates on hold in September, and it is expected to do the same later this week. The decision to maintain interest rates could provide some relief for potential homebuyers, but it remains to be seen how the housing market will respond in the coming months.
In conclusion, the decline in mortgage approvals, coupled with low remortgage numbers and reduced borrowing, raises concerns about the housing market in the UK. The Bank of England’s consecutive interest rate hikes have contributed to the higher cost of mortgages, impacting affordability and dampening home sales. It is essential for policymakers to monitor and address these issues to ensure a balanced and sustainable housing market.