The number of mortgage approvals being made to home buyers fell to its lowest level since June 2020 last month.
Figures from the Bank of England show that 58,977 home loans were approved in October 2022, which is the lowest figure seen since the pandemic. This is a huge drop from the 65,967 approved September, and 74,400 in August.
There was a huge surge in mortgage rates in September after Kwasi Kwarteng's disastrous mini-budget under Liz Truss, but in recent weeks the rates have begun to drop slightly, suggesting the market is calming down after the turmoil. The Bank of England have also hiked up the base rate multiple time since the summer.
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Commenting on the figures, Marc von Grundherr, director of estate agent Benham and Reeves, said: “The decline seen is almost certainly a consequence of a disastrous mini-budget which still lingers in the air while the market seeks to navigate multiple challenges. But we must factor in seasonality too whereby mortgage applications always begin to reduce at the onset of winter.”
Jason Tebb, chief executive officer of property search website OnTheMarket.com, said: “Our own figures show sentiment remained remarkably robust in October despite political and economic uncertainty, with 60% of properties sold subject to contract within 30 days of being advertised for sale.”
The Bank’s Money and Credit report said that approvals for re-mortgaging, which only capture re-mortgaging with a different lender, increased slightly in October, to 51,300. Alice Haine, personal finance analyst at investment platform Bestinvest, said: “For those with mortgage deals about to expire who haven’t locked in a new product, there are more options available now.
“Variable-rate mortgages, for example, are cheaper than fixed-rate deals, however they do track interest rates, making it likely they will go up in the months ahead. However, once rates hit their peak next spring, they are expected to come down, so it could result in short-term pain for long-term gain.”
Currently, the “effective” interest rate – the actual interest rate paid – on newly drawn mortgages increased to 3.09% in October. However, these rates are expected to go down next year.
Karim Haji, UK head of financial services at KPMG, said: “There is ample evidence of a slowing economy, from the various GDP forecasts to this data showing that cautious consumers are saving more to build up a buffer ahead of anticipated tougher times.
“People are also redirecting more of their disposable income to work costs, like transport, and essentials, like food, and they appear to be being cautious when it comes to discretionary and big-ticket spend.”
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