Residential mortgage approvals dropped to 53,400 in September, down from 54,900 in August, according to the latest Bank of England figures, while borrowing of mortgage debt decreased to £3.9 billion last month from £4.2 billion in August.
New buyer approvals and net mortgage borrowing both fell below their six-month averages, signalling increased pressure on housing market affordability, suggested commentators.
Conversely, remortgaging approvals saw a significant jump to 42,600 in September, as the effective rate on newly drawn mortgages increased by 4.63%.
While the data reflects a period where many buyers were “sitting on their hands” ahead of the chancellor’s Autumn Budget announcements, initiatives like the Your First Home equity scheme offer optimism heading into the winter.
Commenting on the latest figures, Tomer Aboody, founding director of specialist lender at MT Finance, said: “A further decline in mortgage approvals reflects low confidence with the current government as the cost of living continues to rise and would-be homebuyers are being asked to pay more across the board.
“Any government serious about helping the economy would surely consider lower taxes in order to stimulate growth but the Budget did not deliver on that front.
“Headline measures to support home ownership, including the First Time Buyer ISA and Your First Home equity scheme, will provide first-time buyers with a clearer route onto the property ladder, as well as a welcome boost for developers. But beyond that there was little to boost activity and momentum.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, commented: “Mortgage approvals are arguably the best barometer of future market activity. These figures demonstrate buyer intentions and were particularly interesting this time as they reflect the period of political and economic uncertainty leading up to the Budget.
“Not-too-much-of-a-difference is perhaps the best way of describing this data considering the number of buyers and sellers we have noticed in our offices who have been sitting on their hands in anticipation of yesterday’s announcements.
“Looking forward, we are expecting a little more action although sadly the delay in the Your First Home scheme will mean many aspiring first-time buyers have to stay renting for longer to take advantage of it, which will have knock-on effect on activity generally.”
Richard Pinch, senior director at Broadstone, said the decline points to a housing market “under increasing pressure” due to affordability constraints and higher mortgage costs.
Pinch added: “Yesterday, the OBR forecast that mortgage repayments will reach 4.25% of household disposable income by 2031, the highest level since 2009, while the average effective mortgage rate is expected to rise from 4% to around 5% over the same period.
“With borrowers continuing to roll off cheaper fixed-rate deals, the squeeze on household finances looks only likely to intensify.
“This presents a growing challenge for lenders, who must balance supporting new lending with managing potential deterioration in credit quality across existing mortgage portfolios. While arrears have remained relatively contained, robust affordability assessments, proactive monitoring of financial stress and forward-looking stress testing will be critical as households adjust to a prolonged period of higher borrowing costs.”
A dip in mortgage approvals is “disappointing, yet understandable”, the CEO of Propertymark, Nathan Emerson says.
“However, it is welcome to see positivity when looking at the volume of approvals for remortgaging when compared to the month previous,” he added.
“The housing market has been navigating a myriad of challenges, including inflation, which currently sits at 3.5%, and an overall mortgage market that has rapidly withdrawn many previously attractive mortgage products.
“Buyers are currently treading a cautious path in the face of what is a demanding housing market in many regions. However, as announced in yesterday’s Budget, the Chancellor’s ‘Your First Home’ scheme provides optimism for many first-time buyers hoping to take their first steps onto the housing ladder.
“It would be welcome to see continued efforts to significantly increase the supply of new-build properties. Any such commitment must also include sensible discussions around vital supply chains and the skill sets needed to deliver on homebuilding ambitions.”
Looking to the future, John Phillips, CEO of Just Mortgages and Spicerhaart, commented: “While I’m sure there has been an element of wait and see with the Autumn Budget, the hope is that now it is out the way, we see the release of some pent-up demand.
“I’m sure the news on the Your First Home scheme will undoubtedly help generate interest as that schemes gets set to launch.
“Even if the scheme helps enable brokers to engage positively with prospective clients or encourage them to open the door and seek advice, I’d count that as a real win. While the scheme has its sceptics, there’s a real opportunity to view it as the gateway to a broader conversation around the full range of options that are available right now to make homeownership a reality.
“As we head towards the end of the year, brokers will need stay proactive and remain visible, using all the tools at their disposal to give clients confidence and help them navigate this changing market.”
