UK Mortgage Approvals Decline as Property Market Slows
British lenders approved the fewest new mortgages in six months in August, according to data released by the Bank of England on Friday. This indicates a further slowdown in the property market as mortgage interest rates continue to rise. However, borrowing by consumers has shown some signs of gathering steam.
In August, banks and building societies approved 45,354 mortgages for house purchase, down from 49,532 in July. These figures were broadly in line with economists’ expectations in a Reuters poll. The number of properties being re-mortgaged also fell to the lowest level since July 2012, as existing homeowners sought to avoid locking in current high interest rates.
Experts suggest that both buyers and homeowners are choosing to wait in the hope of securing a better deal. Myron Jobson, senior personal finance analyst at brokers Interactive Investor, stated, “Simply put, buyers and homeowners alike are happy to play the waiting game in the hope of getting a better deal.”
The average interest rate paid on a new mortgage rose by 0.16 percentage points to 4.82% in August, which is the highest recorded since 2016. This increase in mortgage rates is seen as a contributing factor to the slowdown in the property market.
Although mortgage approvals have declined, net mortgage lending in August reached its highest level since January at £1.218 billion ($1.49 billion). This follows an unusually weak increase of £201 million in July.
In addition to mortgage lending, there has been a significant increase in net unsecured lending to consumers. It jumped by £1.644 billion from the previous month, surpassing all forecasts in the Reuters poll. The annual growth rate in unsecured borrowing in August increased to 7.6%, the highest since April.
The Bank of England data also revealed that savers are moving their money from instant access accounts to those with longer-term fixed rates. This is an attempt to lock in higher interest rates. There has also been a small net withdrawal from banks and building societies. This potentially indicates that households are feeling the squeeze from the high cost of living. However, the withdrawals could also reflect money being transferred to higher-yielding investments.
The slowdown in the UK housing market has been evident for a year, stemming from bond market turmoil triggered by then-Prime Minister Liz Truss’ September 2022 “mini-budget,” which led to a temporary freeze in mortgage lending. The rising interest rates set by the Bank of England have further contributed to the increase in mortgage costs.
According to mortgage lender Halifax, house prices in August were 4.6% lower than the previous year, marking the sharpest drop in 14 years. However, a survey conducted by property website Zoopla indicates a tentative rise in potential buyers during September, potentially due to mortgage rates appearing to have peaked.
Last week, the Bank of England decided to keep interest rates unchanged at their 15-year high of 5.25%, following 14 consecutive rises. This decision was made amidst the ongoing challenges in the property market and the broader economic landscape.
The data released by the Bank of England provides insight into the current state of the UK property market and the impact of rising mortgage interest rates. While mortgage approvals have declined, there is a slight boost in consumer borrowing. The overall slowdown in the housing market appears to be influenced by various factors, including the impact of government policies, bond market turmoil, and rising interest rates. The future trajectory of the property market remains uncertain, and potential buyers continue to cautiously navigate the market.
More detail via ETRealty.com here… ( Image via ETRealty.com )
