Net mortgage borrowing in the UK rose to £1.2bn in August, a significant increase from £0.2bn in July, according to the Bank of England’s latest statistics.
This marks the fourth consecutive monthly rise in mortgage borrowing.
However, the data also revealed a decline in net mortgage approvals for house purchases, falling to 45,400 in August from 49,500 in July.
Approvals for remortgaging also dropped, from 39,300 in July to 25,000 in August—the lowest figure since July 2012.
The effective interest rate on new mortgages increased to 4.82% in August, up 16 basis points from July.
Reaction
Darryl Dhoffer, founder of Bedford-based The Mortgage Expert:
“As these figures highlight, mortgage activity in August was frankly dreadful and September hasn’t seen much of an improvement, despite the fact mortgage rates have been coming down.
“Many people are sitting on their hands amid the economic uncertainty and the result is a barren property market.
“I expect this trend to continue until we see further holds in the Bank of England base rate and, better still, for it to start coming down.
“The fact remortgage levels were down so sharply reflects the fact that more people are doing product transfers as they have no other choice for affordability reasons.”
Justin Moy, founder at Chelmsford-based mortgage broker, EHF Mortgages:
“The popularity of product transfers has gone through the roof, which explains why net approvals for remortgaging, which only capture remortgaging with a different lender, went through the floor.
“Product transfers are less faff and involve less underwriting, which for many borrowers is key right now. While the purchase market has cooled overall, we have seen a good number of first-time buyers looking to buy.
“Falling property prices are helping drive this, along with the high rental costs in the South East, and even with higher mortgage rates, the monthly cost is similar, if not cheaper.
“The vast majority of our applications are still Product Transfers and remortgages and, with rates reducing, we are spending time grabbing cheaper deals for those who made early decisions to reserve.
“Let’s see if the markets settle this side of Christmas, or if we see another bounce and increases.”
Riz Malik, director of Southend-on-Sea-based independent mortgage broker, R3 Mortgages:
“I recently asked an estate agent how he is finding the market at the moment. His response was, ‘what market?’.
“That basically sums up the mortgage and wider housing market at present.
“With essentially two months before the Christmas slowdown, I am not expecting any miracles for the remainder of 2023.
“Mortgage rates may be coming down, but consumer sentiment has been hit with a sledgehammer.”
Ranald Mitchell, director of Norwich-based independent mortgage broker, Charwin Private Clients:
“August is usually a slower month so I’m not reading too much into the purchase data.
“There are still plenty of aspirational homeowners and movers out there, and they are waiting for the cost of borrowing to ease back to more workable levels.
“As mortgage costs are reducing, there will be an uptick in property sales again for the remainder of the year.
“For people remortgaging, we are seeing a significant increase in debt consolidation enquiries, with many people’s finances at breaking point.
“The message to anyone looking to restructure debt is to do it sooner rather than later.
“Debt accruing to unmanageable levels can prevent the remortgage from happening at all, so don’t wait.
“If you feel debt levels and personal solvency is a problem, act on your instinct. Don’t stick your head in the sand.”
Lewis Shaw, founder of Mansfield-based Shaw Financial Services:
“Mortgage approvals were down sharply in August, with new purchase applications taking the brunt of the hit.
“How much of that was to do with the natural August lull and how much was due to the wobbles in the mortgage and property market is anyone’s guess.
“September has picked up slightly but there hasn’t been the sort of autumn bounce that usually happens as people look to move before Christmas.
“With rates reducing and swathes of new property for sale as landlords look to offload, transactions could pick up in the final quarter of the year.
“However, this is on a knife edge, and sentiment from buyers is clear: why would I buy a depreciating asset right now when it will be cheaper next month?”
Steven Hargreaves, mortgage adviser at Leeds-based The Mortgage Co:
“Based on our experience and speaking to other mortgage brokers and lenders, it was no surprise the August figures were at a six-month low.
“August is a holiday period, meaning lending ordinarily dips, but August 2023 felt particularly quiet.
“We are hoping that, with the interest rate war now raging, we can catch up in the autumn for the lower-than-average activity levels over the summer.
“The way in which lenders are now pricing their products and interest rates suggests they are hoping for the same.”
Elliott Culley, director at Hayling Island-based Switch Mortgage Finance:
“August is usually slow due to school holidays, but with rates as high as they were it was no surprise to see a more accentuated slowdown.
“July was bad, but August was even worse. The purchase market has been struggling for the past few months.
“Rates coming down in September may help activity levels pick up slightly, but rates really need to fall further for a full recovery.”
Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial:
“Mortgage approvals continue to fall and this will continue into next year until the central bank starts cutting rates.
“Conversely, people are really desperate with rates so high and are turning to riskier forms of credit to make ends meet, like credit cards and overdrafts.
“Pressure is building up in the credit system and defaults will start rearing their heads in earnest if rates stay too high for too long, which looks likely.”
Imran Khan, co-founder of Canary Wharf-based PropertyLoop:
“The property market was noticeably quiet in August, reflecting the usual seasonal slowdown but worsened by falling house prices.
“Fewer buyers and more renters have shifted the market dynamics. While there’s been a slight drop in mortgage rates, high interest rates overall have changed what buyers can afford, pushing many to lower-priced properties.
“The higher end of the market is struggling, with sellers cutting prices by over 5% to get an offer.
“The recent Halifax report highlighted a significant price drop, especially in London.
“As interest rates may rise, we foresee continued challenges for buyers and further price reductions from sellers as we move into the last quarter of the year.”
Craig Fish, managing director at London-based mortgage broker Lodestone:
“Transaction levels in August were down as they always are during the summer months.
“The expected increase in business that is normally seen in September just hasn’t materialised.
“We’ve had lots of enquiries but there is a real hesitation form people to commit.
“It’s likely that until we see stability from the Bank of England, and lenders reduce rates further, the lack of purchase activity is set to continue until early in 2024.”
Simon Webb, managing director of capital markets and finance at LiveMore:
“It is good to see that both gross and net mortgage lending were up in August but the fall in approvals for house purchases and remortgaging doesn’t bode well for future lending over the next two or three months.
“Remortgaging approvals were down 36% to just 25,000 cases, the lowest figure in 13 years.
“I expect there were a lot more product transfers as interest rates are much higher now and borrowers don’t need to go through the whole affordability assessment as they do with a remortgage.
“It would be interesting to see the product transfer data as we know around half a million borrowers are due to remortgage by the end of this year.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“Mortgage approvals fell in August 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 in August, increasing by 16 basis points to 4.82%.
“However, with the Bank of England taking many by surprise in maintaining base rate at 5.25%, the worst of the pain may be over with many economists believing interest rates have peaked.
“Swap rates, which underpin the pricing of fixed-rate mortgages, and have been exceptionally volatile in past months, continue to edge downwards as inflation continues to fall.
“Lenders are busy reducing fixed-rate mortgages, with numerous sub-5% 5-year fixes available – a trend we expect to continue in coming weeks.”
Gareth Lewis, managing director of property lender MT Finance:
“Mortgages are up in terms of debt borrowed while approvals are down, as people are forced to dip into their savings or borrow on credit.
“For many, those savings were overinflated from the pandemic so that is not so much of an issue but people are clearly utilising either borrowing or savings to tide them over.
“Whether this was to give them a nice summer or because they have to, we don’t know.
“But with inflation coming down, the cost-of-living side of things should be easing anyway.
“There will be a bit of lag in borrowing from a mortgage perspective over coming months given approvals are down.
“The stabilisation in base rate will boost consumer confidence and better mortgage rates will be available going forward as lenders clamour to get some volume of lending done before the end of the year.”
Adam Oldfield, chief revenue officer at Phoebus Software:
“With two sets of figures out this morning it’s interesting to see that the Bank of England’s figures show that both house purchase and remortgage numbers fell dramatically from July to August.
“Whereas the non-seasonally adjusted estimate for residential property transactions, from HMRC, in August shows an increase in activity.
“This volatility is indicative of everything we are seeing from lenders as they continue to reduce mortgage rates even as the Bank of England hold rates at their highest level for 22 years.
“We may well see a flurry of activity in October if would-be house hunters are tempted by reduced mortgage rates. However, we may not have seen the last of the base rate rises in 2023.
“All in all, we are looking at a pretty unsettled market and that picture is unlikely to change in the near future.
“Add to this the increase in the number of arrears and lenders are heading into even more troubled waters.
“The Mortgage Charter and Consumer Duty have put a huge onus of responsibility on lenders and now is the time to ensure that all systems are in place.
“This will allow other resources to be allocated where they are really needed to ensure exposed borrowers are given the help they need.”
Steve Seal, CEO of Bluestone Mortgages:
“Following news that first-time buyers in the UK have dropped by a fifth1, it’s no surprise to see a dip in mortgage approvals as rates remain high.
“However, following last week’s decision by the Bank of England to hold rates, we are starting to see a glimmer of hope on the horizon as rates are starting to edge down.
“For those still worried about how they can achieve their homeownership dreams, now is the time to engage with a mortgage broker who would be able to signpost potential borrowers to the best available options for their unique circumstances.
“It is the duty of these industry professionals to help people take their first steps or climb up the property ladder so that their homeownership dreams can still live on.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“Forward facing mortgages approvals give an indication of activity in the coming months but don’t tell the whole story.
“Cash buyers make up a significant proportion who won’t show up on these figures.
“Average mortgage rates below six per cent for the first time in several months is certainly beginning to encourage more activity.”
Kevin Brown, savings specialist at Scottish Friendly:
“Remortgaging rates have plummeted to an 11-year low in the latest figures from the Bank of England’s Money and Credit survey.
“The collapse in remortgages reflects the effects of rising bank rates on households. Many will be struggling to get a new deal, or trying to ride out a variable rate for a short while in the hope that fixed deals will get cheaper in the coming months.
“There is some evidence that this might be worthwhile as fixed rates are showing signs of falling, particularly as the Monetary Policy Committee put a pause on rate hikes last week.
“The concern though is how much powder households have in store to ride out what will be painfully high variable rates.
“In a sense this is the bank rate doing its job, but net outflows of banking deposits again suggests that households are under increasing pressure and therefore tapping into their hard-saved money.
“Having a savings cushion is really important, so any families still able to put aside cash should do everything they can to save.
“With big clouds over the economy it may be some time before we’re in the clear and budgets begin to be relieved. Average savings rates still largely won’t beat inflation so long-term saving should really be put to use through investing instead.”
Jonathan Samuels, CEO of Octane Capital:
“After enduring rate increase after rate increase at the hands of the Bank of England, it’s little wonder that buyer appetites have diminished and this has now become clear with a consistent drop in the level of mortgage approvals seen across the market.
“While the base rate has finally been frozen, it’s unlikely that this will bring any notable turnaround so late in the day and we expect that the outlook will remain subdued throughout the remainder of this year.”
Verona Frankish, CEO of Yopa:
“August saw mortgage market activity dip, with total approvals falling by around 8% when compared to the previous month.
“Not only was this the second consecutive monthly decline but also the second lowest total seen so far this year.
“While there’s certainly a seasonal lull at play, this has been more pronounced due to higher interest rates dampening buyer enthusiasm, with approvals falling by 37% when compared to the heights of last year.
“However, with the Bank of England finally calling a halt to rising interest rates last week, we should see an uplift in activity return in the coming months as buyers react to this greater degree of market certainty.”
