Mortgage approvals for home buyers fell significantly in September as rising interest rates and cost-of-living concerns eroded demand and weighed on market activity.
Official data from the Bank of England (BoE) put the number of approvals last month at 66,800, down 10 per cent from August’s figure of 74,400 and below the six-month average of 67,200. Economists predict the downward trend will continue.
“All told, we expect house purchase mortgage approvals to average just 55,000 per month in 2023, the least since 2012,” said Gabriella Dickens, senior UK economist with Pantheon Macroeconomics.
READ MORE: Falling house prices will bring renters limited comfort
Much of the month covered the period before the disastrous mini-Budget of September 23 that triggered panic on financial markets and led to the withdrawal of large chunks of mortgage products as lenders put up costs on their offerings.
Recent interest rate increases from the BoE have also pushed mortgage rates higher. Despite the looming threat of recession, members of the Bank’s Monetary Policy Committee are expected on Thursday to announce another hefty increase to the current base rate of 2.25%.
The BoE said approvals for remortgaging, which only capture those who change their lender, also fell slightly to 49,100 from 49,500 in August. However, this was higher than the six-month average of 47,100.
The interest rate paid on new mortgages increased by 29 basis points to 2.84 per cent in September, the biggest rise since December of last year when the BoE began hiking its base rate to combat inflation. Latest data from Moneyfacts show the current cost of the average two-year mortgage sitting at just under 6.5 per cent.
READ MORE: NatWest says house prices to fall next year
The figures from the BoE add to evidence pointing towards an impending fall in UK house prices. Last week banking group NatWest predicted a 7% decline and fellow high street lender Lloyds forecast an 8% fall, while senior property economist Andrew Wishart at Capital Economics expects house prices to be on average 12% lower by the middle of next year.
Yesterday’s data also showed that unsecured credit – borrowing on credit cards, personal loans, overdrafts, and auto finance – rose by £745 million in September, the smallest monthly increase since December.
“This combination is indicative of a household sector that is low on confidence and either unable, or unwilling, to borrow more and save less to try and push back against the squeeze on real incomes,” said Martin Beck, chief economic advisor to the EY ITEM Club.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here