Mortgage approvals dropped by almost 11,000 in December to 35,600, down from 46,200 in November, and the lowest level seen since May 2020.
The Bank of England revealed the fourth consecutive monthly decrease in mortgage approvals as part of its Money and Credit statistics.
Overall, net borrowing of mortgage debt by individuals decreased from £4.3bn to £3.2bn in December.
While the ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 0.32%, to 3.67% in December.
Steve Seal, CEO, Bluestone Mortgages, said: “The effects of the mini-budget continue to reverberate.
“This combined with the slowdown in demand for housing as rising interest rates continues to squeeze the finances of many has contributed to a further fall in mortgage lending activity.
“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.
“For those worried about the current environment and how it will affect their homeownership goals, now more than ever is the time to pick up the phone to a mortgage broker.
“These professionals are here to support existing and potential borrowers and will be able to signpost them to the available options that suit their unique circumstances. It is our industry’s duty and at the heart of what we do as specialist lenders to remind people that the homeownership dream lives on.”
Further reaction
Phil Gamblin, founder of Cardiff-based mortgage broker, Oak Financial:
“The drop in mortgage approvals in December was hardly surprising following the mini-Budget and given the usual seasonal lull. However, we’ve seen a large number of enquiries from home buyers and remortgagers alike in January, suggesting that the turmoil felt at the end of 2022 is dying down and confidence is returning to the market.
“If, as expected, the Bank of England raises rates again this week, I don’t expect this to have a massive effect on the property market. Mortgage rates have been coming down consistently over the past couple of months and lenders are now firmly entering ‘rate war’ territory.
“This will only encourage buyers further. House prices have dropped, on average, by around 5% in the past few months. I think we can expect the same to happen over the next three to four months and that things will then level off. I don’t think the huge price drops that some are predicting are going to materialise, all the more so given the lack of stock.”
Gary Boakes, director of Salisbury-based mortgage broker, Verve Financial:
“December was probably the slowest month I have seen in 10 years and this data highlights that. Nobody was interested in doing anything and people were simply waiting to see if rates continued to fall in January. 2-year fixed rates are now hot again and the appeal of tracker products is disappearing quickly. Despite the chaos caused by Liz Truss’s mini-Budget, we have since had months of positive news of rates reducing, which has culminated in a busy January.”
Kylie-Ann Gatecliffe, director at Selby-based broker, KAG Financial:
“As this data shows very clearly, December was quieter than usual as the fallout from the mini-Budget continued and people chose to sit tight. January, however, has definitely picked up the pace. We have been busy since we came back into the office, with a mixture of enquiries from first-time buyers to people seeking to remortgage.
“Fixed rates dropping as they are is definitely stimulating demand among people looking to move, and we are seeing trackers becoming less desirable and fixed rates once again the favourite due to the narrowing gap in pricing between fixed and tracker products.”
Joe Stallard, director of Stroud-based House & Holiday Home Mortgages:
“In our experience, the meteor that was the mini-Budget has not destroyed planet mortgage as many said it would. Yes, rates rose sharply after the mini-Budget but things started to improve once that hapless administration was removed. December was a record for us as far as mortgage approvals are concerned and that level of activity has continued through into January. The property market isn’t as quiet as some make it out to be.”
Riz Malik, director of Southend-on-Sea-based broker, R3 Mortgages:
“People who sat on their hands in the last quarter of 2022, and this data shows many did precisely that, are now coming out to play. It was a surprise that lenders weren’t quicker coming out of the gates in January with rate cuts but the increased competition we now have is supporting activity levels in the housing market.
“Purchase activity has been surprisingly high but the key is how long these transactions will take and what percentage will complete. I am still deciding whether to send an invoice for September to December 2022 to Downing Street for immediate payment after the mini-Budget omnishambles.”
Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial:
“Confidence in the market is down and the low number of mortgage approvals in December confirms this. Look on Rightmove and you’ll see property listings drying up. Only those that are overvalued remain.
“Although the listing prices are more realistic than asking prices last month, there is a long way to go before buyers are tempted as we know more rate rises are coming and there’s a plethora of bad economic news further down the line. House prices will fall 15% by the summer when the pain of the national finances is being fully felt. Increasing rates, recession and rising unemployment will cause this retreat.
“However, when the central bank reacts by cutting rates and the Government start signalling they may relax some of their ludicrous tax increases, confidence will return and we could see out 2023 on an even keel.”
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com:
“Would-be buyers have cottoned onto the fact that fixed mortgage rates have been dropping steadily since ‘Safe Hands’ Hunt took over the reins at the Treasury. There’s still interest in trackers and discount mortgages, but fixes are coming back into vogue again. December was very quiet but encouragingly, we’ve seen a steady influx of mortgage enquiries in January.”
