Mortgage approvals increased slightly in July, according to data released by the Bank of England on Tuesday. This is the latest showing of the housing market’s resilience amidst the turbulent economic environment.
July 2022 saw 63,770 mortgage approvals, 586 higher than June’s figure of 63,184. This is, of course, 14.4% lower than the 74,494 approvals during the stamp duty holiday-inflated figures of July 2021.
It is, however, also beneath the pre-pandemic average up to February 2020 of 66,800.
Net borrowing also decreased slightly to £5.1 billion in July, down from £5.3 billion in June, though this is above the 12-month pre-pandemic average of £4.3 billion.
Such oscillations in approvals and net lending are entirely normal, though given the context of rising interest rates, soaring inflation, and a cost of living crisis, it is no surprise that mortgage activity is forecast by some to fall over the rest of the year.
Simon Webb, managing director of capital markets and finance at LiveMore, said:
“Looking ahead, using the mortgage approvals figures, there was an increase although it was less than 1% and 4.5% lower than the pre-pandemic 12-month average. So, we could see lending figures lower in the next two or three months.
As the cost of living keeps on rising along with future increases in mortgage rates, home buyers will find it increasingly difficult to afford a new home. That’s assuming they can find one as housing stock for sale still remains low and house prices are still rising, although at a slower pace.”
Yet, approvals – an indicator of future borrowing – are on the up, and with house prices retaining steady growth in June and transactions soaring in July, there is a strong chance of the market maintaining some degree of momentum.
Indeed, it is that impenetrable momentum that has seen conveyancers’ workloads rocket by 34% over the previous three years.
Any drop in momentum would not, however, necessarily impact conveyancers’ workloads, with Andy Sommerville, Director of Search Acumen, stating that “workloads will be defined by progressively more complex cases moving forwards as buyers and sellers seek to act in an increasingly difficult economic environment”. He added:
“Although the cost of living crisis is set to slow the market further, we might also see a slew of properties come to market in the autumn as sellers look to take advantage before prices drop too far.
At the same time, as interest rates go up, homeowners may be at increasing risk of overextending themselves financially having purchased a larger home since the pandemic, adding more potential sellers to the market.
As more supply should balance out house prices, this may not translate to fewer transactions, as greater choice allows for more potential buyers to enter the market. It is entirely possible that we see an extended period of strong transactional activity despite economic headwinds.”
Anthony Codling, CEO, twindig, described the market as “treading water” amid choppy political waters:
“Mortgage approvals stabilised in July nudging up 0.9% as Boris Johnson resigned.
History appears to be repeating itself with the housing market choosing to tread water as the political backdrop gets a little choppy.
Once again, uncertainty surrounding the occupant at 10 Downing Street does not appear to unsettle the UK housing market, with households choosing to ‘get moving done’.”
