New data released by the Bank of England has revealed mortgage approvals fell by nearly 11% between September and October.
Specifically, the number of approvals fell from 66,000 in September to 59,000 in October. The net borrowing of mortgage debt by individuals also decreased from £5.9 billion to £4 billion in the same period.
This comes as Threadneedle Street hiked interest rates by 0.5 percentage points to 2.25% at the end of September – the highest rate in 14 years at the time. Coupled with the impact of Kwasi Kwarteng’s mini-budget, a fall in mortgage approvals comes as no great surprise.
This view is shared by Jonathan Samuels, CEO, Octane Capital, who described the fall as “an expected consequence of the many challenges facing the market right now”.
Samuels also added that, despite the “doom and gloom”, the figures “may defy the harshest critics”:
“[Approvals] have not dropped off a cliff as such. Compared to historic levels for this time of year they are down 12% when compared with previous levels seen in the same month in 2017, 2018 and 2019.”
Simon McCulloch, Chief Commercial and Growth Officer at Smoove, said the fall was a reflection of market instability – and the inverse effect can be expected once calm returns:
“Mortgage rates climbed to their highest levels last month since 2008 after the previous government’s misguided economic policy provoked chaos across the housing market.
Fortunately, rates have since calmed, with the average five-year fixed rate falling below 6% in recent weeks, according to Moneyfacts. While the bleak outlook described in the Autumn Statement will certainly weigh on the confidence of prospective buyers going forward, a return to relative normality should restore some stability to the property market along with stamp duty cuts being retained for now.”
“Although today’s mortgage figures will bring no cause for celebration, they are certainly no cause for alarm either,” said Director of Benham and Reeves Marc von Grundherr, adding:
“[However], we must factor in seasonality too whereby mortgage applications always begin to reduce at the onset of winter. As fixed rate mortgage costs continue to fall in Q1, expect to see a restoration of buyer demand.”
CEO of Alliance Fund Iain Crawford, commented:
“The property market ebbs and flows and is well known to be cyclical. Yes, we’ve seen turmoil in the interest rate markets since the flawed Kwasi Kwarteng mini-budget and the effect on money costs is feeding through to buyer sentiment for sure.
But wait. Property owners have enjoyed rather a sweet time of late and even if there is an adjustment of 5% to 10% in prices, those owners are still well ahead of the game on accrued value.
2023 will be a leaner property market, that is undisputed. But talk of price crashes and meltdowns are wide of the mark given that medium term mortgage rates are already dropping significantly.”
