The Money and Credit statistics from the Bank of England (BoE) showed that there were 39,637 house purchase approvals during the month at a value of £8.8bn, down from 40,540 in December. Excluding the impact of Covid-19 on the mortgage and housing market, the last time house purchase approvals were lower was in January 2009 when they totalled 32,400.
Remortgage approvals came to 25,357 at a value of £5.3bn. This was slightly down on the previous month’s 25,228. The last time remortgage approvals were lower was in July 2012, when they reached 24,400.
Figures were down when compared to January lat year, which saw 73,992 house purchase approvals and 46,233 remortgage approvals.
Approval volumes were also lower than the equivalent pre-pandemic period, as January 2019 recorded 66,766 approvals for house purchase and 50,377 for remortgage.
Still reasons to be positive
Simon Webb, managing director of capital markets and finance at LiveMore, said: “This is the fifth consecutive month approvals have dropped and is almost half of the 74,400 that went through last August.
“Uncertainty remains in the housing market as supply and demand slows with less people looking to both buy and sell. Although mortgage rates are stabilising, there is no let-up in the high cost of living, which will put some people off making large financial commitments like buying a house.”
John Phillips, national operations director at Just Mortgages, said: “There are many that think my continuing optimism in the housing market is unfounded but with house prices rising by 9.8 per cent in the 12 months to December 2022 a slowdown in lending is not a disaster and a long way from being a crisis.”
Lisa Martin, development director at TMA Club, also said there were “reasons to be optimistic”.
“Not only has demand been greater than expected in the early stages of this year, but competition between lenders has driven down mortgage rates with the average five-year fixed falling below four per cent in early February for the first time since the government’s mini Budget.
“While an unpredictable market means we may see rates start to rise again, as a result of the short-term swap rates rising, rates are, at present, relatively low compared to recent history,” she added.
Stuart Wilson, chairman at Air Club, shared similar views, saying it was worth noting that “gross lending still remains higher than pre-pandemic levels, demonstrating the resiliency of the UK market.
“As we now head towards the spring, the mortgage market is seeing a return to form with consumer confidence beginning to pick back up again.”
Brian Byrnes, head of personal finance at Moneybox, said: “The current property market downturn is shifting the balance of power from the seller’s market we witnessed post-lockdown to a buyer’s market and so there is cause for reasonable optimism among prospective buyers.”
Gross mortgage lending rises
Gross mortgage lending in January came to £23.3bn, slightly up from the previous month’s £23bn.
By comparison, gross mortgage lending came to £22.8bn in January 2019.
Gross mortgage repayments also saw a modest increase from £21.1bn to £21.5bn in January, while net mortgage lending fell from £3.1bn to £2.5bn.
The average interest rate paid on newly-drawn mortgages rose by 21 basis points from 3.67 per cent to 3.88 per cent. The average rate on the outstanding stock of mortgages came to 2.54 per cent in January, four basis points higher than the month before.
Business picks up in February
Although January saw a dip in business, many mortgage professionals reported that this recovered in February.
Rob Gill, managing director of Altura Mortgage Finance, said: “While January started slowly, mortgage enquiries picked up strongly from the middle of the month and this continued into February. A potent mix of buyers taking advantage of a slower market and remortgage borrowers keen to mitigate against rising interest rates by securing the best deal possible has created a sweet spot for certain sectors of the mortgage market.”
Gary Boakes, director of Verve Financial said Feburary had been “very busy” with more people looking for properties.
He added: “The increase in mortgage payments has now been met with an ‘it is what it is’ mindset as people realise we will try to keep their payments as low as we can but ultimately, we can’t magic sub-two per cent rates anymore. The longer this goes on, the more people will understand this could be the new normal.”
Kylie-Ann Gatecliffe, director at KAG Financial, said: “We have seen an uplift in February compared to January, with even more first-time buyers and homemovers now accepting the new norm of the current market.”
