Summary: The latest data from the Bank of England reveals a decrease in net mortgage approvals last month, signaling a continued decline in the UK housing market. With only 49,400 mortgage approvals in July, down from 54,600 in June, the number of home loans has been on a steady decline since reaching a peak of 72,343 in August of the previous year. Prior to the pandemic, monthly mortgage approvals ranged from 60,000 to 70,000. However, the market is now being negatively impacted by the highest mortgage rates since the global financial crisis, leading to a lack of confidence among buyers.
Property website Zoopla has predicted that the number of homes bought and sold this year will fall to one million, representing a 21% decrease compared to the previous year, and the lowest figure since 2012. This decline in mortgage approvals aligns with the observations made by industry experts. David White, chief operations officer at broker Simply Lending, confirmed that there has been a 31% drop in mortgage approvals for house purchases in July and August. Similarly, Stephen Perkins, managing director at broker Yellow Brick Mortgages, stated that the current lack of confidence in the market is discouraging potential buyers from making purchases. He explained that many people seeking to remortgage are being forced to stay with their existing lenders due to affordability and criterion restrictions.
Despite the challenging market conditions, lenders are keen to meet their lending targets and are consequently offering competitive mortgage rates to entice customers to stay with them. However, Mark Harris, CEO of mortgage broker SPF Private Clients, cautioned that the worst may not be over. The average rate on new mortgages in July increased to 4.66%, with expectations of another base rate increase by the Bank of England next month.
In addition to the declining mortgage market, projections suggest that spending on UK commercial property may also experience a significant decrease. BNP Paribas Real Estate forecasts a potential 33% drop in commercial property spend to £41 billion in 2023, below both last year’s figures and the long-run average. Volatile market conditions and investor uncertainty are cited as key factors contributing to this decline.
Sources:
– Bank of England
– Zoopla
– Simply Lending
– Yellow Brick Mortgages
– SPF Private Clients
– BNP Paribas Real Estate