New data released by the Bank of England has confirmed mortgage approvals fell during April of this year having risen the prior month.
Threadneedle Street said net mortgage approvals for house purchases fell from 51,500 in March to 48,700 in April – a 26% year-on-year fall from April 2022. Approvals for remortgaging increased slightly from 32,200 to 32,500 during the same period.
The “effective” interest rate – the actual interest rate paid – on newly drawn mortgages rose by five basis points to 4.46% during the month. The rate on the outstanding stock of mortgages also increased slightly, from 2.73% in March to 2.75% in April.
This comes as the Bank’s Monetary Policy Committee announced an 11th consecutive interest rate rise at the end of March, followed by yet another rate rise in May.
“The latest money and credit data from the Bank of England point to a housing market that is freezing up at a time when property transactions should be flowing nicely,” said Karen Noye, mortgage expert at Quilter:
“Excluding the pandemic, the amount of mortgage debt borrowed is at its lowest level on record, with £1.4bn of net repayments in April. With mortgage approvals also falling and yesterday’s 25% fall in property transactions, the outlook for the housing market is somewhat bleak as we head into the summer months.”
Noye added that despite the more secure economic footing in the UK compared with recent months, it looks as though rates – which continue to have a “significant effect” on the housing market – may yet rise once again in the coming weeks.
“Even with a brighter economic picture, household finances are likely to remain buffeted by the volatility that inflation and higher interest rates bring.”
On an optimistic note, Managing Director of Sirius Property Finance Nicholas Christofi pointed out that while current mortgage activity is “some way off the pandemic pace”, the figures seen in April were “by far the second highest level seen so far this year”.
“We’ve seen strong signs that the spring surge in market activity is well and truly underway, with mortgage approvals climbing quite considerably since the start of the year,” said Founder and CEO of easyMoney Jason Ferrando, adding:
“This remains the case despite a slight monthly reduction and with the exception of last month, April’s total is the strongest performance seen in the last six months.
Of course, the threat of yet another interest rate hike this month could prove problematic, with the ever escalating cost of borrowing already proving a sizeable hurdle and one that is causing buyers to tread more tentatively.”
“The month on month reduction in mortgage approvals seen in April was always likely to materialise given the Bank of England’s decision to increase interest rates just one month prior,” added CEO of Octane Capital Jonathan Samuels:
“What we’re now seeing is a knee-jerk reaction by buyers when facing these higher borrowing costs take shape as a reduction in mortgage market activity.
The good news is that this is likely to be a temporary reduction as they go back to the drawing board to ascertain just how much they can afford to borrow before returning to the fold.
However, we’ve already seen the base rate rise again in May, with a further hike expected this month, so we can expect monthly mortgage approval trends to remain erratic, at best, for the foreseeable future.”
