The Bank’s Money & Credit report found that 35,600 such mortgages were approved in December, down from 46,200 in November. That’s the fourth straight month in which purchase mortgage approvals have declined, while the Bank noted that if the pandemic period is excluded, this is the lowest level since January 2009.
Approvals for remortgages also fell over the month, from 32,600 to 26,100. That’s the lowest level registered since January 2013.
According to the Bank of England report, net borrowing of mortgage debt dropped from £4.3bn in November to £3.2bn in December, while gross lending dropped to £23.3bn from £25.1bn.
A significant slowdown
The Bank of England figures show that the housing market is now “in the midst of a significant slowdown”, according to Karen Noye, mortgage expert at Quilter.
She noted that with various household costs increasing at the moment, we may be reaching a time where people begin to put their homes up for sale in favour of one which will be cheaper in terms of the monthly bills.
Noye continued: “House prices have started to fall in recent months, and should the level of demand continue to decrease at the same time more people put their homes on the market, we will likely see this trend continue and a switch from the seller’s market to a buyer’s market could materialise.”
Breaching the four per cent barrier
Mark Harris, chief executive of SPF Private Clients, said that the figures appear “rather gloomy” at first, and suggested that the drop in mortgage approvals was down to the rise in the rates charged on new mortgages.
However, he was more positive about the future prospects for the market.
He continued: “Thankfully, the situation has significantly eased for borrowers since the mini Budget fallout. Lenders continue to chip away at fixed-rate mortgage pricing as Swap rates edge gently downwards. With Virgin Money reducing its five-year fixed rate today to 4.17 per cent, it won’t be long before the psychological four per cent barrier is breached, making fixes considerably more attractive than they were just a few weeks ago.”
Headwinds ahead
Steve Seal, CEO of Bluestone Mortgages, agreed that the figures were a demonstration of the impact of the mini Budget continuing to “reverberate”.
He added: “Although lenders have resumed lending since the extreme swap rate volatility, there are still strong headwinds lying ahead in the current inflationary environment, which will no doubt impact the homeownership dreams of many across the country.”
