Mortgage approvals have fallen to the lowest level seen since the peak of the UK’s house-buying frenzy in June 2020, according to official data today.
Brits were approved 66,000 mortgages in April, down from 69,500 in March, data from the Bank of England has revealed. This is slightly below the pre-pandemic average of 66,700, as mortgage rates rise.
Interest rates for mortgages climbed 1.82 per cent in April, after the Bank of England hiked the base rate for lending in December last year.
The Office for Budget Responsibility forecasts mortgage interest increases to hit around 13 per cent in 2023, which is expected to further dampen lending rates.
“Increasing mortgage rates have unsurprisingly led to reduced lending volumes, after significant volatility this may be the start of a return to ‘normal’ pre-pandemic lending activity,” said Michael Davidson, chief revenue officer at digital lending marketplace Freedom Finance, adding that Brits are leaning towards improving their current property instead of moving.
More than 191,000 homes changed hands in June 2020, as the pandemic-era race for space ushered in unprecedented levels of activity in the market.
However, a combination of rising interest rates on mortgages, record house prices and the cost of living crisis have seen deals begin to slow in the first few months of the year.
Net borrowing for mortgages has sunk from £6.4bn in March to £4.1bn in April, slightly below the pre-pandemic average of £4.3bn.
Jason Tebb, boss of property search site OnTheMarket, said the figures suggest that “the market is rebalancing” but that it will “take time” before this becomes more prevalent.
“The ‘new normal’, an elevated version of the pre-pandemic market, continues, along with early signs of a move to a more nuanced and rebalanced sector,” he added. “A ‘one size fits all’ picture is yet to emerge as it’s not the same in every region, with those buyers needing to move still determined to get on with it.”