In its Q3 quarterly management statement published this morning, Santander said: “With a slower housing market and higher mortgage rates, applications fell in the first nine months of the year.”
The lender added: “Our decision to optimise the balance sheet given higher funding costs has contributed to a reduction of £10.1bn in mortgage lending.
Brokers said this lack of lending across the industry as a whole has been the main contributor to the rate war in recent months.
According to Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages: “These results from Santander will be similar across all the major lenders who are all far below their lending targets.
“This has been the main catalyst behind the mortgage rate war during the third quarter and October to date, as lenders have been scrapping over the remaining crumbs of new lending opportunities.
“It has also led to a focus on existing borrower retention.
“Rates are unlikely to reduce significantly in the next 12 months, so lenders are setting expectations that their lending volumes will remain reduced for the foreseeable, also with lower margins as they compete for business.”
Looking ahead, Santander said in its results: “We expect high-for-longer interest rates to have a more pronounced impact on households and businesses.”
Justin Moy, managing director at Chelmsford-based EHF Mortgages, noted the adverse impact this will have on both the mortgage and property markets: “The ‘high-for-longer’ scenario with rates is certainly not going to help either the property or mortgage markets, as if the cost of borrowing remains high, it will meaningfully impact what buyers can afford to pay and will drive further reductions in property prices.
“It will also keep the current trend of Product Transfers strong, as affordability is challenged and rates are competitively priced compared to the wider market.”
Elliott Culley, director at Switch Mortgage Finance, agreed with Moy, adding that many people are still recalibrating to the new interest rate environment: “This statement from Santander is in line with the Bank of England’s forecast of having to maintain the base rate at current levels to reduce inflation in 2024.
“If mortgage rates do reduce further then the market will become stronger and house prices will start to stabilise, but if they stay around current levels we are likely to see a slower return to the market until people start to realise this is the new normal.
“After almost a decade and a half of abnormally low rates, this may not happen overnight, which will stall demand for property and could put further downward pressure on prices.”
