Mortgage approvals

Rise in transactions predicted despite rates rise… for now

The Bank of England has released its monthly data on total mortgage approvals for house purchase, showing 73,922 approvals during the month of January. This is the fourth consecutive month in which approvals have increased, and the third-best January performance in the last 10 years.

The amount borrowed by consumers was also up from December, with £5.9 million borrowed in mortgages in January. Both this and the number of mortgage approvals are above the pre-pandemic 12 month average of 66,700.

The rate on new mortgages was an average of 1.58%. The rate rise had already been factored in during December, or perhaps even earlier.

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said:

“Homebuyers defied December’s Bank of England rate rise, borrowing almost £6 billion more in mortgages in January, and getting tens of thousands of deals approved for the coming months. But this isn’t a sign that they’re completely unphased by rate rises, it’s one of a number of reactions that show growing concern.

There’s a good chance that, for some buyers, all the speculation in the latter half of 2021 meant that December’s rate rise was factored in months earlier, and was small enough not to make much difference to their plans. However, for others, this presented a window of opportunity. Mortgage rates had risen slightly, but didn’t budge during the month.”

Coles suggests that the continued increase may be partly due to predicted rate rises in the coming months, which could “put the brakes on the housing market”:

“Buyers knew they had the chance to lock in a cheap fixed rate deal for a home move, and protect themselves from rises being widely predicted for February and beyond.

When February’s rate rises feed through into the figures we may well see approvals slow down, and with more rises expected in the spring, it could put the brakes on the housing market. This could be the brief window of calm before the heavens open on the property market.”

Director of Henry Dannell, Geoff Garrett, said:

 “There has been no let up in the relentless appetite for homeownership amongst the nation’s buyers and we continue to see them swamp the market at mass despite a squeeze in affordability across other areas of life.

Lenders remain undeterred in funding this activity and there is little sign of this changing. In fact, even with rates predicted to rise further, some institutions remain ultra-competitive as they seek to elbow their competitors out of the way and take advantage of this homebuyer demand.”

Managing Director of Sirius Property Finance, Nicholas Christofi, commented:

“What goes up must inevitably come down, but it certainly seems as though we’re yet to hit the ceiling where mortgage approvals are concerned.

In fact, we’ve just witnessed one of the strongest starts to a year in the last decade which is quite an achievement given the astronomic market growth we’ve seen pretty much throughout the last 12 months.

It certainly looks as though a further uplift may be on the cards however, it is fair to say that we are yet to see rising interest rates and an increase in the cost of living impact top line market health. As the year plays out, these factors are likely to become more prominent and this will no doubt curb the number of buyers entering the market and the sums they choose to borrow.”

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