Mortgage approvals drop in additional signal of housing market slowdown
Mortgage approvals dropped virtually 10% final month, new Bank of England figures present.
The web lower – from 54,600 in June to 49,400 in July – is a five-month low and worse than anticipated. A ballot of economists predicted the determine can be round 51,000.
It comes following a string of figures from lenders and property companies which counsel the housing market is slowing down.
Leading property web site Zoopla mentioned on Wednesday morning that the UK was on track for around one million house and flat sales by the end of this year – the bottom degree since 2012.
Experts have warned that high interest rates and the cost of living crisis are having an impression on affordability for a lot of.
The Bank of England’s month-to-month cash and credit score report, printed on Wednesday, additionally discovered that the amount of cash borrowed by customers fell to £1.2bn in July, down from a five-year high in June.
Households deposited a further £0.4bn with banks and constructing societies in the identical month – down sharply on £3.8bn in June. That seems to counsel people’ funds have gotten extra stretched, commentators mentioned.
Meanwhile, web borrowing of mortgage debt elevated for the third consecutive month to £0.2bn in July, whereas approvals for remortgaging elevated barely from 39,100 to 39,300 throughout the identical interval.
The common two-year mounted residential mortgage price is presently 6.72%, whereas the five-year price is 6.21%, in line with Moneyfacts.
But specialists mentioned the total results of the most recent rises have been but to be felt.
Read extra from enterprise:
UK’s best and worst airports named
‘No job losses at Wilko’ while bids considered
Food prices still rising faster than wages
The “effective” rate of interest – the precise rate of interest paid – on newly drawn mortgages was 4.66% in July, the Bank of England mentioned.
Andrew Wishart, a senior property economist from Capital Economics, mentioned: “The decline in mortgage approvals to a five-month low in July showed the renewed surge in mortgage rates since April has begun to take its toll.
“But given the lag between quoted mortgage charges and approvals, the total impression is unlikely to turn into clear till September.
“It takes two to three months for developments in quoted mortgage rates to feed through to housing market activity… so further falls in mortgage approvals lie ahead.”
Alice Haine, a private finance analyst at Bestinvest, mentioned: “Mortgage lending is likely to remain weak over the coming months as buyer demand and spending power continues to get pummelled by soaring interest rates and high living costs.
“Average mortgage charges may have now softened from their July peak, however that can do little to ease the stress and nervousness for brand spanking new patrons desperately attempting to safe their first deal or these trying to refinance who face considerably increased reimbursement ranges.
“As affordability challenges mount, property prices will come under increasing pressure, forcing sellers to market their homes more competitively if they want to secure a sale.”