Mortgage approvals for house purchases dropped by more than 10,000 from November to December
(Picture: Daniel Lynch)Mortgage borrowing slumped by a quarter last month as the after effects of the disastrous mini-Budget in September continued to spook the housing market through to the end of year.
Latest Bank of England figures show net mortgage borrowing down 25 per cent from £4.3 billion in November to £3.2 billion in December.
Meanwhile mortgage approvals for house purchases dropped from 46,200 in November to 35,600 in December, the lowest since May 2020 shortly after the start of the pandemic. It was the fourth consecutive monthly decrease. Approvals for remortgaging fell from 32,600 in November to 26,100 in December, the lowest level since January 2013.
The Bank’s data also showed that the ‘effective’ interest rate — the actual interest rate paid — paid by borrowers on newly drawn mortgages rose by 32 basis points, to 3.67 per cent in December.
The figures come three days ahead of the Bank’s decision on interest rates when it is expected to raise its cost of borrowing from 3.5 per cent to four per cent at noon on Thursday.
They are also the latest evidence of how the fallout of Kwasi Kwarteng’s botched Commons statement, which bought chaos to the mortgage and gilts market, hit the confidence of buyers.
But commentators said the worst of the crisis is now over with market mortgage rates falling slowly over recent weeks. Latest data from analysts Moneyfacts shows average five year fix rates at 5.2 per cent and two year fixes averaging 5.45 per cent.
Lucian Cook, head of residential research at agents Savills said: “Today’s numbers reflect a period of significant uncertainty and disruption in the mortgage markets, but they are still another clear sign that it will be a challenging year for the housing market, especially with the expectation of a further increase in the bank’s base rate on Thursday.
Steve Seal, chief executive of lender 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.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “At first sight the numbers are rather gloomy. Thankfully, the situation has significantly eased for borrowers since the mini-Budget fallout.
“Lenders continue to chip away at fixed-rate mortgage pricing as Swap rates edge gently downwards. With Virgin Money reducing its five-year fixed rate today to 4.17 per cent, it won’t be long before the psychological 4% barrier is breached, making fixes considerably more attractive than they were just a few weeks ago.”
