Mortgage Approval Levels Down 20% Over Past Three Decades Whilst House Prices Rise

Mortgage Approval Levels Down 20% Over Past Three Decades Whilst House Prices Rise

New lending figures released by the Bank of England reflect the general sluggish state of the property market as political uncertainty continues and consumer confidence remains low.

The number of mortgage approvals for property purchases in November was 63,728, down from October’s figure of 66,709.

This is the lowest number of mortgage approvals since March 2018 when the figure was 63,367. It is towards the bottom of the 63,000-68,000 range which has held for the past two years.

However, the long-term average for the 25 years from 1993-2018 is 80,969 mortgage approvals for purchases per month, highlighting the gradual decline in recent years.

The latest figure is 21.3% below this, with 17,241 fewer mortgages. This makes November the third lowest month since August 2016, after December 2017 and March 2018.

Hopefully, the December figures may look a lot more appealing as the Halifax House Price Index for this month highlighted a 2.2% increase on house prices compared with November’s figures.

This means that the annual change for the year ended with 1.3% growth as opposed to the 0.3% predicted in November and may imply that demand is beginning to increase.

Howard Archer, chief economic adviser at leading UK economic forecasting group EY ITEM says of the November figure: “It fuels our belief that Brexit and economic uncertainty may now be having an increased dampening effect on housing market activity.

“Housing market activity is also being limited by still relatively limited consumer purchasing power (despite some recent improvement), fragile consumer confidence and, very possibly, wariness over higher interest rates. However, there are varying performances across regions with the overall national picture dragged down by the poor performance in London and parts of the South East.”

Russell Galley, Managing Director, Halifax, said: “In December the average cost of a home was £229,729 and annual house price growth stood at 1.3%. A stronger monthly growth figure for December improved from a weaker November. Overall, house price growth in 2018 was very much within the range of 0-3% as we forecast at the start of the year.

“In 2019, we’re expecting continued stability in house prices with between 2% and 4% price inflation. This is slightly stronger than 2018, but still fairly subdued by modern comparison. However, this expectation will clearly be dependent on the Brexit outcome, with risks to both sides of our forecast.

“Of course, there are a number of other factors that will impact the market in 2019. The need to raise a significant deposit still acts as a restraint for those looking to buy a new home, limiting the number of potential purchasers.

“This year, mortgage payment affordability is more difficult to predict. There are competing pressures with signs of positive annual pay growth supporting affordability, but risks associated with the potential for higher interest rates are pulling in the other direction. On balance we do not see affordability pushing house price growth significantly in either direction.

“The shortage of homes for sale and continuing low levels of housebuilding both constrain the supply of houses, and in turn support high prices, which will continue to inhibit demand in 2019.”

Do you think there will be a significant upturn in mortgage borrowing in 2019?

Martin Parrin

Martin is a Senior Content Writer for Today’s Conveyancer, Today’s Wills and Probate, Today’s Legal Cyber Risk and Today's Family Lawyer

Having qualified as a teacher, Martin previously worked as a Secondary English Teacher that responsible for Head of Communications.

After recently returning to the North West from Guernsey in the Channel Islands, Martin has left teaching to start a career in writing and pursue his lifelong passion with the written word.

Leave a Reply

Your email address will not be published.