Mortgage approvals for house purchases decreased to 59,000 in October, down from 66,000 in September, according to the latest Bank of England (BoE) figures.
Meanwhile, net borrowing of mortgage debt by individuals decreased from £5.9bn to £4.0bn in October.
The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased was up 0.25% to 3.09% in October.
Steve Seal, CEO, Bluestone Mortgages, said: “The aftermath of the mini-Budget continues to take its toll, with a further drop-off in lending activity.
“While lenders are re-entering the mortgage market after extreme swap rate volatility, there are still strong headwinds lying ahead, which will undoubtedly have an enormous impact on the homeownership dream.
“For those worried about the current lending environment and how it will impact their ability to get onto the housing ladder, now is the time to pick up the phone and speak with a mortgage broker.
“These professionals are best placed to support existing and would-be borrowers, as well as signpost them to the options available. It’s the duty of our industry and at the core of what we do to remind people that the homeownership dream is still within reach.”
Conor Murphy, CEO, Smartr365, added: “This morning’s numbers are indicative of the volatility we have recently been experiencing in the market – in the case of October, intensified by the impact of the ‘mini budget’ announced the previous month.
“The more recent Autumn Statement has substantially eased pressure on markets.
“Overall, the numbers remain robust and are a testament to the mortgage sector’s ongoing resilience. Key to maintaining this will continue to be instilling homebuyers with a sense of confidence – which the Stamp Duty cuts have gone some way to doing.
“Meanwhile, brokers play a fundamental role in helping homebuyers to navigate these unprecedented market conditions – which is undoubtedly a challenging task.
“Harnessing the power of technology to provide a seamless end-to-end mortgage journey can help take administrative pressures off brokers, allowing them to focus on giving advice whilst securing products and rates quickly before markets move again, all in all providing homebuyers with an optimal experience.”
Further reaction
Emma Hollingworth, managing director of mortgages at MPowered Mortgages:
“In light of the financial pressure many UK households are currently facing, it’s not surprising to see net borrowing and mortgage approvals for house purchases decrease.
“However, with the average five-year fixed rate deal dropping below 5% last week for the first time in seven weeks, this offers homebuyers a degree of reassurance, following a period of uncertainty in the wake of September’s ‘mini budget’, and it is positive to see products returning to market.
“With interest rates remaining at their highest levels since 2008, it is critical that potential homebuyers and remortgagers seek professional financial advice in order to help identify and source the most suitable products for them.
“The current economic environment presents a degree of complexity, and it’s important homebuyers receive guidance in order to navigate it.
“Using data driven technology and AI can help in this process, enabling products to be sourced, applied for and secured swiftly, and administrative tasks to be streamlined, allowing brokers to focus on providing much-needed support and advice.”
Karen Noye, mortgage expert at Quilter:
“This morning’s Money and Credit statistics from the Bank of England once again show signs of a housing market on the brink of a significant dip, if not a crash.
“The latest figures reveal that mortgage approvals for house purchases fell to 59,000 in October, down from 66,000 in September.
“This latest fall suggests demand is beginning to come out of the market, and this may come at a time where more people are starting to consider putting their properties up for sale as a result of unaffordable mortgage and heating costs.
“As we move further into the winter and the temperature drops, increased energy bills alongside greatly increased mortgage payments may result in more and more people being unable to afford to stay in their current homes.
“If this is the case – and the level of demand continues to decrease – we will likely see a subsequent reduction in house prices and a switch from the seller’s market seen in recent years to a buyer’s market.
“The Bank of England’s base rate now sits at 3%, the highest rate seen for over three decades, and further rate rises are widely expected as inflation continues to grow.
“This jump in interest rates means those looking to remortgage or take their first step onto the property ladder will suffer considerably higher monthly costs than they would have done just a couple of months earlier.
“If rates continue to rise and push buying a first home out of reach for many, then demand in the housing market will likely see an even further dip as people hold off on buying in the current climate.
“The cost-of-living crisis is also putting significant stress on people’s finances outside of the housing market, illustrated by this morning’s data which shows an increase in the level of borrowing taking place.
“Individuals borrowed an additional £0.8 billion in consumer credit in October, up from September’s £0.6bn.
“While this number remains well below August’s £1.2bn, the uptick hints at a renewed reliance on credit as energy bills and other everyday costs continue to rise.
“Should borrowing continue to rise and more people start to load debt onto credit cards to help make ends meet, it could prove disastrous.
“The effective rate on interest bearing credit cards rose to 19.31% in October, up from 18.96% in September, meaning borrowers could rapidly find themselves spiralling into debt.”
Stuart Wilson, chairman at Air Club:
“There is no denying that October was an eventful month for the mortgage market, advisers and the UK economy, and the Bank of England’s update today certainly reflects this. However, total mortgage borrowing in October remained above levels seen before the pandemic, despite a slight fall in approvals for house purchases, demonstrating the resilience of the sector.
“Recently, the Government’s Autumn Statement has reassured markets after a turbulent period and we’re still seeing strong demand in the mortgage and later life lending markets, which we fully expect to continue as we settle into the new year.
“With older borrowers being particularly vulnerable to soaring inflation rates, the mortgage affordability squeeze and sky-high utility bills, it is vitally important that they speak to a specialist adviser if they believe they need support. Finding someone who can talk them through all their options as well as the features and flexibilities boasted by modern equity release products will allow them to make the best choice for their individual circumstances.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“Net borrowing decreased in October compared with September, while mortgage approvals for house purchases also dipped and were below the six-month average.
“As expected, the average rate paid on new mortgages rose significantly, increasing by 25 basis points to 3.09% in October. As borrowers will be all too aware, this came on the back of a significant increase in the average rate paid in September.
“Thankfully, the situation has eased for borrowers since the worst of the fallout from the mini-Budget. Lenders have been returning with more attractive fixed-rate mortgages as Swap rates have settled, albeit at a higher level than in the recent past.
“With more interest rate rises likely in the short term, borrowers concerned about their mortgage should seek advice from a broker to find out what options are available.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“These comprehensive figures, though reflecting buying decisions made over the previous few months or so, always provide an indication of future direction of travel for housing activity.
“On the one hand, we are starting to appreciate the size of the missile which hit the market soon after the mini-Budget. But also, lack of a sharper fall demonstrates the determination of many to continue with their agreed sales despite the rising cost of living and mortgages in particular, which we have certainly witnessed in our offices.”
Tomer Aboody, director of property lender MT Finance:
“It’s not surprising to see property purchase levels decreasing as costs for consumers are increasing. Energy prices, inflation and mortgage rates are bound to have an impact on sentiment and people’s pockets.
“A surge of remortgages also shows homeowners taking advantage of agreed or offered mortgages which they have had from lenders, at lower levels, making sure they’re tying themselves into lower rates or at least taking variable products which seem relatively cheap in comparison to new fixed products.
“While the market has taken a hit and will slow further, there will still be buyers out there and hopefully the government can offer further assistance like some of their European counterparts have done.”
Jonathan Samuels, CEO of Octane Capital:
“The latest mortgage approval figures are an expected consequence of the many challenges facing the market right now. Indeed, a reduction in buyer appetite comes as no surprise in the context of a worsening cost of living crisis, runaway inflation, and continued economic uncertainty. For now at least.
However, despite the doom and gloom, the figures may defy the harshest critics as they have not dropped off a cliff as such. Compared to historic levels for this time of year they are down 12% when compared with previous levels seen in the same month in 2017, 2018 and 2019.”
Marc von Grundherr, director of Benham and Reeves:
“Although today’s mortgage figures will bring no cause for celebration, they are certainly no cause for alarm either, and the decline seen is almost certainly a consequence of a disastrous mini-budget which still lingers in the air while the market seeks to navigate multiple challenges.
But we must factor in seasonality too whereby mortgage applications always begin to reduce at the onset of winter. As fixed rate mortgage costs continue to fall in Q1, expect to see a restoration of buyer demand.”
James Forrester, managing director of Barrows and Forrester:
“The decline in approvals and monies actually lent is the latest dent to property market sentiment and is almost certainly down to a government that will be heavily featured on Santa’s naughty list this year.
However, we also need to remember that the decline towards pre-pandemic normality is expected and in part due to the influence of a seasonal market slow down. Armageddon this is not.”
Iain Crawford, CEO of Alliance Fund:
“The property market ebbs and flows and is well known to be cyclical. Yes, we’ve seen turmoil in the interest rate markets since the flawed Kwasi Kwatreng Budget and the effect on money costs is feeding through to buyer sentiment for sure.
But wait. Property owners have enjoyed rather a sweet time of late and even if there is an adjustment of 5% to 10% in prices, those owners are still well ahead of the game on accrued value.
2023 will be a leaner property market, that is undisputed. But talk of price crashes and meltdowns are wide of the mark given that medium term mortgage rates are already dropping significantly.”
Simon Webb, managing director of capital markets and finance at LiveMore:
“The ‘effective’ interest rate, which is the actual interest rate paid, has risen every month in 2022.
“For newly drawn mortgages the effective interest rate has almost doubled since January 2022 from 1.58% to 3.09% in October, a rise of 25 basis points from September.
“These increases are to be expected as Bank base rate and swap rates have also risen throughout the year, but almost doubling in 10 months for new mortgages goes to show how swift the rate rises are.
“As interest rates rise there has been a slowdown in new borrowing while house purchase approvals are down again and lower than the six-month average.
“With buyer demand now waning, house price growth slowing and the high cost-of-living impacting on people’s pockets, the housing market is starting to take a hit.”
Richard Pike, chief sales and marketing officer at Phoebus Software:
“A fall in mortgage approvals and an increase in consumer credit shows that housing has fallen down the list of priorities as the rising cost-of-living impacts on a very real level.
“However, there are still opportunities in the market as we can see by the increase in remortgaging.
“As the year comes to a close, mortgage lenders will not only need to reach set targets but also keep a close eye on borrowers that may be starting to struggle.
“Communication will be key in the coming months and lenders will need to have all their ducks in a row to ensure that their systems are set up to deal with any increase in missed payments or defaults.
“That said, we are now in the quietest period of the year for house buying, so who knows what the new year will bring?
“Perhaps the only reason that housing has fallen down the list of priorities is because we are getting that much closer to Christmas?”
Simon McCulloch, chief commercial and growth officer at Smoove:
“A further decrease in mortgage approvals reflects the market instability inflicted by the ‘mini budget’ in late September.
“Mortgage rates climbed to their highest levels last month since 2008 after the previous Government’s misguided economic policy provoked chaos across the housing market.
“Fortunately, rates have since calmed, with the average 5-year fixed rate falling below 6% in recent weeks, according to Moneyfacts.
“While the bleak outlook described in the Autumn Statement will certainly weigh on the confidence of prospective buyers going forward, a return to relative normality should restore some stability to the property market along with stamp duty cuts being retained for now.”
