Mortgage approvals in the UK fell for the fifth consecutive month in January 2023, new data from the Bank of England has revealed.
Net approvals for house purchases, an indicator of future borrowing, decreased to 39,600 in January from 40,500 in December.
This represents the lowest number of approvals since January 2009 (32,400) outside of the early pandemic period.
Approvals for remortgaging – which only capture remortgaging with a different lender) – fell to 25,400 in January from 26,200 in December, the lowest level since July 2012 (24,400).
The effective interest rate on newly drawn mortgages increased by 21 basis points from 3.67% to 3.88% during the month. The rate on the outstanding stock of mortgages increased by 4 basis points, to 2.54%.
Charlotte Nixon, mortgage expert at Quilter, said the statistics “paint a worrying picture of the nation’s finances” with mortgage approvals continuing their downward trajectory. However, she suggested falling mortgage rates may offer some respite for the market:
“After the troubling days following the mini budget, mortgage rates have dropped faster than originally anticipated and therefore there is a chance that this will help encourage more people to market and therefore soften the landing for house prices.
We may also see the number of mortgage approvals improve next month as people take advantage of lenders lowering prices to try and entice more people to market. However, despite it being technically the first day of spring we are still not through the cold months yet and people will be suffering with high energy costs alongside higher mortgage rates. This may make people think twice before opting to move home and suffer all the costs that go with that.”
“There’s no doubt that September’s disastrous mini budget and the mortgage sector uncertainty that followed has had a negative impact on the UK property market, leaving a decline in both mortgage approval and house prices in its wake,” said founder and CEO of easyMoney, Jason Ferrando. On a more optimistic note, he added:
“However, it certainly seems as though the worst is behind us and we expect to see stabilising mortgage rates drive a rebound in approvals in the coming months, echoing wider industry sentiment that buyers are returning to the market with confidence in 2023.”
CEO of Octane Capital, Jonathan Samuels, offered a similar perspective:
“The current level of mortgage market activity remains some way off the benchmark that we would expect to see at this time of year and it’s clear that many buyers remain deterred by higher mortgage rates, higher living costs and the wider economic landscape.
However, as the year progresses and the herd mentality of the UK homebuyer kicks in, we expect to see a growing level of confidence return. While they certainly won’t be purchasing at the record house price highs seen during the pandemic, this will ensure the long term health of the housing market remains robust.”
