UK mortgage approvals at lowest since pandemic

Autumn in London, UK Mortgage approvals hit lowest level since June 2020.
Mortgage approvals hit lowest level since June 2020. Photo: Getty

Mortgage approvals fell to the lowest level since mid-2020 in November after a jump in borrowing costs brought demand for property purchases to a grinding halt.

Mortgage approvals for house purchases decreased to 46,075 in November, down from 58,997 in October, to the lowest level since June 2020, according to the latest money and credit statistics from the Bank of England (BoE).

The "effective" interest rate ⁠— the actual interest rate paid ⁠— on newly drawn mortgages increased by 26 basis points, to 3.35% in November.

The BoE has lifted interest rates nine times in the past year to choke off inflation, which pushed interest rates on mortgages close to 6% from around 1%.

Approvals for remortgaging with a different lender fell to 32,500 in November from 51,300 in October, and were below the previous six-month average of 48,100.

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“November’s drop in mortgage approvals and remortgaging is no surprise when you consider the catalogue of challenges facing the property market ⁠— with higher borrowing costs, double-digit inflation and falling real wages impacting affordability for both first-time buyers and those looking to refinance,” Alice Haine, personal finance analyst at Bestinvest, said.

“Mortgage rates may have now stabilised from their October highs, but the pain is far from over for homeowners. While inflation is expected to ease over the course of 2023, this is because the Bank of England will continue its rate-hiking cycle to curb the runaway price rises seen over the past 18 months despite the UK entering a recession.

“This means interest rates are likely to jump from the current level of 3.5% to around 4.25% to 4.5%, which although high when compared to the past decade or so, is a slight improvement on the 6% or more expected in the wake of the Kwarteng mini-budget.”

Gross mortgage lending fell from £27.7bn in October to £25.7bn in November, while gross repayments dropped from £25.8bn to £21.6bn.

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“A third consecutive monthly decline in mortgage approval levels will certainly seem like cause for concern given the doom and gloom that has enveloped the UK property market in recent months,” founder and CEO of easyMoney, Jason Ferrando, said

“The huge spike in market activity brought about by the pandemic property market boom over the last two years simply wasn’t sustainable. So while the year ahead may look muted in comparison, we expect to see a far more settled property market stand strong despite the wider economic turmoil surrounding it.”

Separate figures from the BoE revealed consumers borrowed an additional £1.5bn in consumer credit, on net, above the £700m borrowed in October ⁠— driven by an additional £1.2bn of credit card borrowing.