New data has revealed mortgage approvals plummeted in November 2022 to their lowest level since June 2020, suggesting a dip in property transactions may be on the horizon.
The Bank of England said mortgage approvals for house purchases decreased to 46,100 in November from 57,900 in October, the biggest drop seen since April 2020.
This level is also firmly beneath the 10-year average of 67,093 approvals per month:
Despite this, Jason Ferrando, founder and CEO of easyMoney, suggested this fall is simply a return to the pre-pandemic norm – “albeit a rather bumpy landing” – rather than the sign of a market collapse. Ferrando added:
“The huge spike in market activity brought about by the pandemic property market boom over the last two years simply wasn’t sustainable. So while the year ahead may look muted in comparison, we expect to see a far more settled property market stand strong despite the wider economic turmoil surrounding it.”
This is reinforced by recent data on first-time buyers (FTBs) which revealed that, while there was a 9% year-on-year fall in the number of FTBs with a mortgage, figures are still above pre-pandemic levels. Specifically, 2022’s FTBs accordingly represent 53% of all house purchases with a mortgage, up from 50% in 2021, and 41% a decade ago.
Echoing Ferrando’s earlier sentiment was the CEO of Octane Capital Jonathan Samuels, who said a reduction in buyer activity was “always on the cards” given the tailwinds of the pandemic and the new norm of higher interest rates, though he added the appetite of the nation’s homebuyers “hasn’t vanished”:
“We continue to see a robust level of buyers entering the market despite the wider economic backdrop, with the total sum lent also exceeding expectation.
Of course, a reduction in demand is likely to bring about a cool in house price growth over the coming year. However, we don’t expect the market to flatline as a result of increasing interest rates, as homeownership remains the driving aspiration for the vast majority.”
“It has been an up and down market for both net and gross lending in 2022 but mortgage approvals are now firmly on a downward slide,” said Leon Diamond, CEO at LiveMore, who was less optimistic:
“Mortgage approvals for house purchases decreased to 46,100 in November, down from 74,400 in August – a 38% fall in just three months – and the lowest level since June 2020. As approvals are an indicator of future lending this give a clear indication of which way the mortgage market for house purchase is going.
If the Bank of England continues to raise the base rate, mortgage lending will decline this year. With the high cost of living and high inflation, more people will be forced to put any home moving plans they have on hold.”
“This was a big drop,” stated Anthony Codling, CEO of twindig:
“This is not the news the housing market was hoping for in the first week of the new year. Mortgage approvals are the key lead indicator for housing transactions, lower mortgage approvals today means fewer housing transactions tomorrow. A reduction in housing transactions will hurt all those businesses that are involved in the home-moving process, but the absence of forced sellers implies that house prices will not fall as far or as fast as housing transactions.”
Adam Oldfield, chief growth officer at Phoebus Software, added:
“The effect of rising interest rates and inflation have now begun to show in the latest figures from the Bank of England. The fact that the number of approvals in November dropped is no surprise really. We have been expecting to see a tightening in the market ever since the turmoil in government caused a degree of uncertainty we haven’t seen since the beginning of the pandemic.”
