The value of mortgage advances in Q2 2023 was down nearly 33% on Q2 2022 as the Bank of England base rate rise, and the cost of living bites.
The Bank of England’s Mortgage Lenders and Administrators Statistics show that mortgage advances completed totalled £52.4bn, down £6.3bn on the same time last year.
On a more positive note, the value of new mortgage commitments (lending agreed to be advanced in the coming months) in 2023 Q2 was up a quarter on Q1 and could provide some insight into the health of the market as we move into the final quarter of 2023 and Q1 2024.
Conjecture remains over the position of the Bank of England on further interest rate rises.
It was announced this week that wage growth has caught up with rising prices for the first time in nearly two years, as regular pay rose by 7.8% in May to July compared with a year earlier, matching the rate of inflation.
It appears as though some seasonality has returned to the mortgage market with searches down around 10% in August compared to July with school and family holidays.
Nathan Reilly, director at Twenty7tec says:
“Augusts are often a quieter month as buyers head off on holiday. We saw an uptick in First Time Buyer activity in August 2023, which often heralds an upturn in activity in September for the remainder of the market.
Rightmove’s mortgage expert Matt Smith says:
“There’s a widely held view that the Base Rate is now nearing its peak which led to a fall in swap rates falling towards the end of last week, and this could mean we see lenders make more significant mortgage rate cuts in the next few weeks. Swap rates have also responded reasonably positively to the unemployment figures and pay growth data.
“All eyes will now look to the upcoming inflation figures, which are likely to have an impact on the next Bank of England Base Rate decision. As long as the news is in line with market expectations, it’s possible that rate reductions will start to gather pace, and we could see sub-5% rates return to the market for the first time since the end of June.”
Reilly adds
“The first two full working weeks of September (weeks 36 and 37 of the year) are also a good time to spot whether it’s going to be a busy run up to Christmas. We’re hoping that with increased products in the market, more first time buyer searches taking place and greater stability in inflationary pressures, that we have the basis for greater market activity.”
Homeowners are feeling the pressure of interest rate rises as figures released by the Bank of England this week reveal that mortgage arrears have hit their highest levels in 7 years, rising over 30% in Q2 2023 compared to Q3 2022.
