Mortgage approvals crash as rate increases hit demand
New figures from the Bank of England have found mortgage approvals have fallen to their lowest levels with hiked up interest rates taking their toll.
Last month the Bank of England discovered the number of new loans approved but not yet completed decreased from 54,600 in June 49,400 in July – a drop of 10%.
Often, summer months are busy periods for people taking out mortgage loans but because the Bank of England have continuously hiked up interest rates, more people have been deterred from purchasing a property.
Andrew Wishart, a property analyst at the consultancy Capital Economics, said the renewed surge in mortgage rates since April had begun to ‘take its toll. But given the lag between quoted mortgage rates and approvals, the full impact is unlikely to become clear until September.’
Wishart said the July approvals reflected mortgage rates of just below 4.5% in May. He said: ‘Since then mortgage rates have risen to 5.85%, so further falls in mortgage approvals lie ahead. We suspect that they will drop to around 40,000 again by September, the same level reached after the previous peak in mortgage rates last November.’
The latest figures for July are the lowest since February 2023 (44,199), while also being down by 21.7% annually – in July 2022 rates hit 63,179.
‘The latest figures show that mortgage approvals have fallen to their lowest since the start of this year,’ Nicholas Christofi, managing director of Sirius Property Finance. ‘This suggests that while the market was starting to gain momentum following the turmoil of last September’s mini budget, fourteen consecutive base rate increases are now taking their toll with buyer sentiment starting to wane.’
Nicholas added: ‘Of course, it’s important to remember that there is a seasonal element at play during the summer holiday period and this could be a contributing factor behind a reduction in market activity.
‘So it will be interesting to see where we stand over the coming months, as we approach what is traditionally a busy time of year in the run up to Christmas.’
Image: Adeolu Eletu
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