UK Mortgage Approvals Hit Six-Month Low as Property Market Slows
Data released by the Bank of England on Friday revealed that British lenders approved the fewest number of new mortgages in the past six months in August. This serves as another clear indication of the slowdown in the property market, as mortgage interest rates continue to rise. However, borrowing by consumers has shown some signs of gathering momentum.
According to the Bank of England, banks and building societies approved 45,354 mortgages for house purchases in August, down from 49,532 in July. These figures are broadly in line with economists’ expectations in a Reuters poll. At the same time, the number of properties being re-mortgaged fell to its lowest level since July 2012, as existing homeowners sought to avoid locking in current high interest rates.
Myron Jobson, senior personal finance analyst at brokers Interactive Investor, explained the situation, stating, “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 increased by 0.16 percentage points to 4.82% in August. This represents the highest level in records dating back to 2016, according to the Bank of England.
On the other hand, net mortgage lending, which typically lags behind approvals by about a month, reached its highest level since January at £1.218 billion ($1.49 billion). This is a considerable improvement from the unusually weak £201 million increase in July.
Meanwhile, net unsecured lending to consumers saw a significant jump of £1.644 billion from the previous month. This followed a rise of £1.271 billion in July, surpassing all forecasts in the Reuters poll. The annual growth rate in unsecured borrowing increased to 7.6% in August from 7.3%, reaching its highest level since April.
The Bank of England data also indicated that savers have been moving their money from instant access accounts to those with longer-term fixed rates in order to lock in higher interest rates. Additionally, there was a small net withdrawal from banks and building societies.
The increased consumer borrowing and net bank withdrawals potentially suggest that households are being squeezed by the high cost of living. However, the withdrawals could also reflect money being transferred to higher-yielding investments.
The UK housing market has been slowing down for the past year, starting with bond market turmoil triggered by former Prime Minister Liz Truss’ September 2022 “mini-budget,” which led to a brief freeze in mortgage lending. The rise in Bank of England interest rates has further contributed to the decline in the housing market, as mortgage costs have increased.
Halifax, a mortgage lender, reported earlier this month that house prices in August were 4.6% lower than they were a year earlier, representing the sharpest drop in 14 years. However, a survey conducted by property website Zoopla revealed a tentative rise in potential buyers during September, as mortgage rates appeared 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 increases.
More detail via Kitco.com here… ( Image via Kitco.com )