"Mortgage approvals have sunk lower again as a result of the mini-Budget, consecutive hikes to the base rate, as well as the continued squeeze on personal finances."
Residential mortgage approvals fell further in January, to 39,600 from 40,500 in December, marking the fifth consecutive monthly decrease, according to the latest Money and Credit data from the Bank of England.
If the onset of the Covid-19 pandemic and period immediately thereafter is excluded, this was the lowest approvals since January 2009 (32,400).
Approvals for remortgaging with a different lender fell to 25,400 in January from 26,200 in December, the lowest level since July 2012.
Net mortgage lending decreased from £3.1 billion to £2.5 billion in January. Gross lending slightly increased from £23.0 billion in December to £23.3 billion in January, while gross repayments rose from £21.1 billion to £21.5 billion.
The ‘effective’ interest rate on newly drawn mortgages increased by 21 basis points from 3.67% to 3.88% in January.
Steve Seal, CEO, Bluestone Mortgages, commented: “Mortgage approvals have sunk lower again as a result of the mini-Budget, consecutive hikes to the base rate, as well as the continued squeeze on personal finances. Though lenders have resumed activity since the aftermath of the mini-Budget, there are still affordability challenges that lie ahead, which will undoubtedly affect the homeownership dreams of many.”
Simon Webb, managing director of capital markets and finance at LiveMore, said: “It’s no surprise that net lending fell in January as many of these mortgages would have started their journey around the time of the fallout from the infamous mini-Budget last September. Lenders were removing products and raising rates quite substantially which would have put off potential buyers.
“Another fall in house purchase mortgage approvals is not a good sign for the mortgage market going forward. This is the fifth consecutive month approvals have dropped and is almost half of the 74,400 that went through last August.
“Uncertainty remains in the housing market as supply and demand slows with less people looking to both buy and sell. Although mortgage rates are stabilising, there is no let-up in the high cost of living, which will put some people off making large financial commitments like buying a house.”
Lisa Martin, development director at TMA Club, added: “Today’s figures reflect the challenges faced by consumers, especially in light of the rising cost of living and changing mortgage rates. As lenders continue to tweak pricing as swap rates move, seeking professional advice to find the most suitable product for them is essential for homebuyers and remortgagers at this time.
“However, there are some reasons to be optimistic. Not only has demand been greater than expected in the early stages of this year, but competition between lenders has driven down mortgage rates with the average five-year fixed falling below 4% in early February for the first time since the government’s ‘mini-budget’. While an unpredictable market means we may see rates start to rise again, as a result of the short term swap rates rising, rates are at present, relatively low compared to recent history.
“Brokers should bear in mind the financial pressures that many homebuyers will be feeling and ensure they have a holistic understanding of each individual customer’s circumstances in order to provide the bespoke advice needed, especially at this time.”
