Mortgage data suggests buyer demand is waning

A property lender claims to have identified signs that the property market is slowing.

Analysis of Bank of England mortgage approval data by Octane Capital suggests the level of buyers may have reached a ceiling.

The research found that there were almost 1.6m mortgage approvals during the previous financial year for 2021/22 – a 10% annual increase.

Of these loans, 894,393 or 57% were mortgage approvals for house purchase.

But while homebuyers remain by far the most active segment of the market, this level of activity increased by just 1% when compared to the previous financial year.

During the initial pandemic year, representing 2020/21, 884,482 mortgages were approved for house purchases, accounting for 62% of total mortgage approvals and climbing by 11% annually. Octane Capital suggests this drastic reduction in the annual rate of growth shows that the heightened market activity driving the current pandemic property market boom is starting to plateau. 

Jonathan Samuels chief executive of Octane Capital, warns that a fourth consecutive interest rate increase and the likelihood of more to come is expected to further dampen buyer demand, with home purchase mortgage approvals also likely to drop.

He said: “The level of buyers being approved for a mortgage on a house purchase has continued to climb year on year and remains incredibly high.

“In this sense, the property market is still running extremely hot, although it certainly seems to have hit the ceiling with the volume of mortgage approvals for house purchases climbing by just one percent versus the previous year. 

“A hatrick of base rate increases towards the end of the last financial year will have no doubt contributed to this reduction in buyer appetites and, in contrast, we’ve seen a sharp uplift in those remortgaging to secure better rates ahead of any further interest rate hikes. 

“With a fourth increase coming so soon in this financial year, there’s a very good chance that the market will now start to deflate, bringing property values back down to earth and returning the market to a state of pre-pandemic normality.”