Net borrowing of mortgage debt by individuals witnessed a significant drop in September, according to the latest Money and Credit statistics released by the Bank of England.
Data indicates a decline from £1.1bn in August to -£0.9bn in September, marking the lowest figure since April 2023 when it reached -£1.3bn.
Further, there was a noticeable decrease in gross lending which fell from £19.4bn in August to £18.6bn in September. At the same time, gross repayments experienced an uptick, rising from £19.0bn to £19.5bn during the same timeframe.
The statistics also highlighted concerning trends in net approvals. Net approvals for house purchases, a key indicator of impending borrowing, persistently declined from 45,400 in August to 43,300 in September.
This is the lowest level observed since January 2023 when it was 39,900. Moreover, net approvals for remortgaging (accounting only for those remortgaging with a different lender) also continued their downward trajectory. They decreased from 25,100 in August to a mere 20,600 in September, a low not seen since January 1999, which recorded 18,300.
Interest rates showed variations as well. The ‘effective’ interest rate on newly acquired mortgages surged by 19 basis points, reaching 5.01% in September. Meanwhile, the interest rate on the outstanding mortgage stock experienced an increase of 8 basis points, moving from 3.06% in August to 3.14% in September.
In light of these statistics, Steve Seal, CEO of Bluestone Mortgages, said: “Following a sharp fall in consumer confidence, it’s no surprise that mortgage approvals have sunk as consumers continue to battle affordability challenges. However, with expectations for homebuyer and homeowner support in the upcoming Autumn Statement, this could signal that hope is on the horizon.
“For those concerned about navigating the property market in the current inflationary scenario, now is the opportune moment to consult a mortgage broker. These experts play a pivotal role in guiding potential and existing borrowers towards the most suitable options for their distinct situations, ensuring they can realise their homeownership aspirations.”
Further reaction
Emma Cox, MD of Real Estate at Shawbrook:
“As we grapple with persistent inflation and high living costs, buyer confidence has wavered. Professional landlords typically use mortgages to expand their property portfolios, so a drop in mortgage approvals can slow down their portfolio growth.
“Nonetheless, specialist lenders are stepping in to assist with complex cases, and Shawbrook has observed an increase in landlords embracing diversification strategies, including more commercial assets. This signals the resilience and adaptability of seasoned investors who remain focused on seizing fresh opportunities.”
Tomer Aboody, director of property lender MT Finance:
“With the future path of interest rates still uncertain and much higher compared with recent years, it is no surprise to see lower levels of mortgage approvals for both transactions and remortgaging.
“The market is waiting to see if rates can finally stabilise or potentially fall in the near future, increasing confidence and the ability to finance.
“Speculation with regard to Government assistance over Stamp Duty is welcome, with such an incentive just what the market needs to get it moving again.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“Mortgage approvals fell in September as buyers remain concerned as to what’s going on in the wider economy and what they can afford.
“The average rate on new mortgages continued to rise, increasing by 19 basis points to 5.01 per cent. With economists believing base rate is at or near its peak, borrowers will be hoping that the worst of the pain may be over.
“While the direction of travel for new mortgage rates is generally downwards, we have seen a few lenders pull rates in the past few days, although this has been primarily in order to slow business.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“Although mortgage payments and inflation may be nearing, or at, their peak, neither are falling fast enough to correct the reduction in activity over the past few months.
“Like buyer enquiries and property appraisals, mortgage approvals help to understand the direction of travel for the market and determine whether prospective purchasers take the plunge.
“The increase in effective interest rates and the shortage of stock are continuing to result in a flattening, rather than a significant reduction, in sales.”
Craig Fish, director at Lodestone Mortgages & Protection:
“Purchase activity in September was extremely slow and so it comes as no surprise that the Bank of England data has confirmed this.
“The majority of our business has been product transfers, especially among our landlord clients. While we have seen a slight uptick in purchase business late in October, it’s still way off where it would normally be.
“I suspect the remainder of the year will be equally as quiet despite lender rate reductions, and hope that 2024 starts in a way more positive manner than 2023 looks set to end.”
Gary Bush, financial adviser at MortgageShop.com:
“These dire mortgage approval figures from the Bank of England were always on the cards. The sentiment surrounding the mortgage and property market isn’t especially strong right now and these figures reflect that.
“The remortgage numbers highlight very clearly how many people have no choice but to stay with their existing lender due to affordability reasons.
“However, October has seen things pick up slightly, due to the lower fixed rates now on offer, as lenders compete for market share in a starved market. We are hoping, or rather praying, for no new crisis to appear on the horizon, whether economic, financial or fiscal, but it seems that one always manages to rear its ugly head. A calm end to 2023 is what’s needed.”
Anil Mistry, director and mortgage broker at RNR Mortgage Solutions:
“Though this data shows a mortgage market that is clearly under pressure, it does feel like many borrowers have acclimatised to the mortgage market we’re now in. More people are now considering making a move while it’s very much a buyer’s market, but that sentiment hasn’t translated into action yet.
“The reality is, there has not been a better time to be a buyer for many years. Yes, mortgage rates are now much higher than they have been for the past decade or more but they are gradually edging down as it feels like we may be at the peak of the interest rate cycle.
“House prices have also come down, which is starting to improve affordability and boost sentiment. Going against the grain, perhaps, we’ve been relatively busy since March, albeit with the usual slowdown during July and August due to the summer holidays.
“September was also fairly busy and while we expected October to be quieter, it has turned out to be pretty decent. Our firm has had its busiest eight months since we started.”
Bob Singh, founder at Chess Mortgages:
“These are extremely testing times for many people with a mortgage. Many borrowers have not experienced the rates of old and leaving a 1% or 2% and being faced with a 5% is daunting and stressful.
“No one expected rates to ever reach the levels they have, so many borrowers have also taken on unsecured debt because they could. Money was cheap and most of us were lured into a false sense of security.
“It’s not uncommon for people to spend all their disposable income and put little, if anything, aside for a rainy day. Lenders recognise this and are increasingly offering lower rate, higher fee options to soften the blow of an all-out increase in monthly payments that simply aren’t affordable.
“Rather than seek advice, many borrowers will take the easy option and simply click to accept an option without often realising the consequences. The industry has much to learn to ensure the client returns to the original adviser who can then evaluate all options and offer an advised sale.”
Simon Bridgland, broker/director at Release Freedom:
“It is no surprise that more borrowers are sticking with their existing lenders in the form of product transfers, rather than seeking a new lender. The last year has seen personal debt increase significantly, meaning borrowers are less likely to meet a new lender’s financial criteria and testing. Product transfers offer people an easy option with pretty good rates.
“Whilst September may have been subdued for purchases and remortgages, October has been more positive as reality hits borrowers that hyper low rates won’t be back so why wait any longer? The market looks set to plod along until the new year when I think buyers will return with vigour.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“Few brokers will be surprised by this data. There is a lot of tumbleweed blowing through the mortgage market at present. Mortgage applications for house purchase, and completions as a whole, were down in September and have continued to dwindle during October to date.
“The property market appears to have entered hibernation mode until the spring. However, there has been plenty of activity on the remortgage front as people seek to minimise the drastic increase in payments due to the skyrocketing base rate over the past 12 months.
“These figures show that many people are sticking with their existing lenders and in many cases that is because they have no other choice. The market won’t pick up substantially until the property market’s alarm clock goes off early in 2024.”
Ranald Mitchell, director at Charwin Private Clients:
“So much for the seasonal pick-up. September was even worse than August and what little activity there was, involved people remortgaging. The fact remortgages are at a 24-year low underlines how exposed the average UK household is as people come off ultra-low rates.
“October, however, has seen a significant uptick in activity with a much healthier number of purchase enquiries and an increase in remortgages. It appears that people who have stalled on buying a home or moving due to interest rate volatility are all now coming forward, having had time to get acquainted with the new mortgage world we’re now in.
“With house prices down, a sense of opportunism is creeping in despite higher lending costs. It is, after all, very much a buyer’s market at present. If what we are seeing is reflective of the market as a whole, then, whisper it only, the property market may be starting to turn around.”
Jamie Thompson, mortgage broker at Jamie Thompson Mortgages:
“September saw a sharp dip in mortgage activity, leading me to think that would be the norm for some time. However, October saw a totally unexpected bounce-back, more than making up for September’s stupor.
“I think people have accepted that gone are the days of record low interest rates and they aren’t going to be coming back. I’m half expecting a little dip before the Autumn budget as people hang on to see if there is going to be another Stamp Duty holiday, which there probably will be.
“It’s almost there was a General Election approaching in the near future. But any Stamp Duty holiday will be yet another sticking plaster on a broken market.”
Elliott Culley, director at Switch Mortgage Finance:
“September was quiet but October has certainly seen an uptick in activity levels. The main increase has been in purchase applications. With rates slowly edging down, buyers increasingly see these rates as not great, but at least affordable.
“If rates continue to reduce I would expect purchase activity to increase further. It seems that the shock of higher interest rates is starting to recede. Borrowers are starting to see current rates as the new normal and want to get on the mortgage ladder regardless.”
Ross McMillan, owner/mortgage advisor at Blue Fish Mortgage Solutions:
“In Scotland, September activity was steady but largely remortgage-based whereas October has witnessed a discernible surge in enquiries from potential purchasers, specifically first-time buyers.
“It’s no surprise, however, that a significant portion of these new enquiries are inclined to look at laying foundations for their mortgage and property plans next year rather than in the next couple of months.
“For some, this stems from a possibly incorrect belief that property prices and interest rates may reduce in the coming months. For most, it’s simply a matter of timing and seasonality that is leading to a postponement of most house-buying endeavours, at least until the early part of 2024.
“Remortgage activity is less seasonal and largely consistent but even with rate competition hotting up between lenders, for a significant number of people, staying with their existing lender due to criteria or circumstances is often the right or only option available.”
Kay Westgarth, sales director, Standard Life Home Finance:
“Although net mortgage approvals have slightly plateaued, the UK property market is still holding strong. Yes, activity has been slightly slower than usual for this time of the year, but the mood in the market is not one of frustration but of positivity. After fourteen consecutive base rate increases, interest rates are now settling into a more comfortable groove, which has surely boosted consumer confidence.
“Of course, it’s important to take a longer view when interpreting the property market’s behaviour. The market is opening up, but affordability and low supply will still pose a major hurdle to many buyers. Professional advisers are already providing a world-class service, but they must leverage sourcing tools and mortgage technology to help borrowers and existing homeowners enjoy satisfactory outcomes in a challenging time.”
Simon Webb, managing director of capital markets and finance at LiveMore:
“The sharp fall in net mortgage lending in September is in stark contrast to the previous four months where net lending increased. However, a fall was expected as mortgage approvals have been declining for the past three months as less people consider moving home. House prices are coming down and there is more housing stock on the market, but higher interest rates are putting people off during a cost-of-living crisis.
“Remortgaging to a different lender is down to its lowest figure in almost 25 years, which I suspect means product transfer numbers are higher. It is easier for borrowers to stay with their current lender as they do not have to go through the affordability assessment in the same way that a remortgage requires.”
Adam Oldfield, chief revenue officer at Phoebus Software:
“The figures from the Bank of England this morning make grim reading as far as the housing market is concerned. Although, it’s no surprise it is disappointing to say the least. The only light at the end of the tunnel is that, especially given the latest unemployment figures, the MPC may decide to hold interest rates again this week.
“The last two months of the year will be interesting in terms of mortgage interest rates and activity. Lower rates over the last couple of months may have given people the impetus to push forward with plans that had been stalled earlier in the year. However, the amount of money being invested in National Savings and Investments is a big indicator that households are trying to make the most of rising savings rates, which may mean that a large number of people have decided to sit tight for now.”
Carl Parker, national director at Just Mortgages:
“Despite the positive trend we have seen with mortgage rates in recent months, today’s data demonstrates the difficult climate we still find ourselves in as borrowers continue to adjust to a higher interest rate environment. Even as rates improve, there’s no question affordability remains the biggest challenge facing borrowers. It’s up to brokers to stay proactive and provide the necessary guidance and assistance needed to educate clients, increase confidence and help them enter and navigate the market.
“Through appearances at housing fayres and exhibitions, we’ve been encouraged by the fact that the appetite is still there among young people especially to buy their own home. While the path to homeownership is not as straightforward, our message has been that there are still routes available. Schemes such as Shared Ownership remain a front runner and most likely the only way for many to make this aspiration a reality. Increasing education will continue to be a primary focus for brokers moving forward, highlighting the variety tools, schemes and options available to support borrowers of all backgrounds.”
Ben Waugh, managing director at more2life:
“Net borrowing of mortgage debt by individuals has dropped slightly for the first time since April, but this blip should not deter from the return of confidence we are anticipating across the market as interest rates begin to steady. Many first time buyers who have been waiting patiently for a more favourable climate before taking their first steps onto the property ladder could choose to do so during the latter stages of the year.
“However, given the turbulence of the last 12 months, a lot of younger borrowers will still be looking towards family members for a financial boost. Homeowners over the age of 55 might consider unlocking wealth from their property to facilitate this support. For those considering this, it is important they consult with an expert adviser who can help them explore all of the options available – whether equity release, wider later life lending or other options – to determine the best option for their personal circumstances.”
Katie Pender, managing director at Target Group:
“Mortgage approvals have been falling for some months now, but this is a significant drop, especially for remortgages. With so many people due to come off fixed rate deals before the end of the year the drop in remortgage approvals is a little surprising. The question is, are people just rolling onto SVR’s waiting to see what will happen with interest rates if inflation continues to fall?
“The UK housing market is in a state of flux and it is very likely that it will stay that way at least until the end of the year, and into 2024. However, lenders need to lend, and we have seen many lenders offering more favourable rates recently. Whether the current deals on offer will be enough to tempt people to buy, or even fix, remains to be seen.
“Confidence may be low but if the prime minister’s pledge to halve inflation before the end of the year comes true, we may see the market pick up earlier than many have predicted. What is certain is that this is the time for more Government intervention into what is an increasingly broken housing market.”
