Industry cites Budget worries and seasonal slowdown as main drivers
Mortgage approvals for house purchases fell in August, with the latest Bank of England figures showing a drop of 500 to 64,700, as the market faced ongoing economic uncertainty and the usual summer slowdown.
Remortgage approvals also fell by 900 to 37,900, reflecting a cautious approach among borrowers and lenders alike.
Net borrowing of mortgage debt by individuals decreased by £0.2 billion to £4.3 billion, and gross lending slipped to £22.7 billion from £24.5 billion in July. Meanwhile, gross repayments edged up to £20.0 billion.
The annual growth rate for net mortgage lending rose slightly from 2.9% to 3%. The ‘effective’ interest rate on new mortgages continued its downward trend, falling to 4.26% in August, while the rate on outstanding mortgages increased marginally to 3.89%.
“Mortgage approvals always set the scene for housing market activity over the next few months but unfortunately these do not paint a particularly pretty picture,” said Jeremy Leaf (pictured top left), north London estate agent and a former RICS residential chairman.
“The impact of Budget rumours in particular which began swirling at the end of the period covered in this data is inevitable, resulting in fewer listings and buyers, as well as price renegotiation and slower transactions. However, the overwhelming majority of sales in our offices are holding together although some vendors clearly still need a dose of realism.”
For Stephanie Daley (pictured top centre), director of partnerships at mortgage adviser Alexander Hall, the dip in mortgage approvals “is almost certainly down to summer seasonality.”
“The broader picture remains one of resilience, with activity consistently holding above the 60,000 threshold for well over a year,” she pointed out. “This level of consistency highlights that underlying buyer demand is strong, and recent incentives, such as the decision to make the Mortgage Guarantee Scheme permanent and adjustments to loan-to-income caps, are helping to improve accessibility and affordability across the market.
“At the same time, major lenders have already started to respond with more flexible criteria, enabling more buyers to secure the finance they need. Looking ahead, the outlook for the remainder of the year remains positive, and we expect these supportive measures to underpin continued buyer activity.”
Nathan Emerson (pictured top right), chief executive of industry body Propertymark, believes that anxiety surrounding the UK government’s forthcoming Budget, uncertainty over interest rate decisions, the typically quieter summer period, and ongoing economic instability have all played a role in the decline in mortgage approvals.
“However, the Bank of England’s freeze on interest rates last week will contribute to future confidence and stability in the mortgage market now that people on variable mortgages and those looking to finance their next home move have additional reassurance of static rates for now,” Emerson said.
“We now look to November, which is when the next interest rate decision will be made. It is important that consumers monitor upcoming mortgage deals, as they can vary significantly given current economic circumstances.”
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