Latest figures from the Bank of England show that mortgage approvals for house purchases decreased to 59,000 in October from 66,000 in September.
The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 25 basis points, to 3.09% in October.
Industry reactions sought to temper gloomy thoughts…
Jason Tebb, CEO of OnTheMarket:
“October saw a decline in both net borrowing of mortgage debt by individuals and approvals for house purchases, an indicator of future borrowing, compared with September.
“Our own figures show sentiment remained remarkably robust in October despite political and economic uncertainty, with 60 per cent of properties Sold Subject to Contract within 30 days of being advertised for sale.
“With interest rates and the cost of living continuing to rise, buyers may have less buying power but even in challenging markets, people need to move. Sellers should take advice from experienced local agents and price realistically or may find their properties stick on the market.”
Steve Seal, CEO, Bluestone Mortgages:
“The aftermath of the mini-budget continues to take its toll, with a further drop-off in lending activity. While lenders are re-entering the mortgage market after extreme swap rate volatility, there are still strong headwinds lying ahead, which will undoubtedly have an enormous impact on the homeownership dream.”
Tom Bill, head of UK residential research at Knight Frank:
“The number of mortgages issued in the month following the mini-Budget was the lowest since the early days of the pandemic, which is not a huge surprise. We don’t believe October was a cliff-edge moment for the UK housing market though.
“Swap rates have returned to where they were in mid-September, which will filter through to lower mortgage costs even as the Bank of England raises the base rate. However, as a new lending landscape emerges after 13 years of ultra-low rates, we believe prices will fall by around 10% over the next two years.
“There will be more downward pressure on prices after Christmas as cheaper mortgage offers made before the mini-Budget work their way through the system.”
Anthony Codling, CEO of Twindig:
“Mortgage approvals plummeted in October as the mini-budget wreaked havoc on the housing market, taking mortgage approvals to their lowest level since June 2020.
“This is clearly not a good sign as mortgage approvals are, in our view, the best housing market lead indicator. Mortgage approvals today lead to housing transactions in the future.
“We hope that the provisions in November’s Autumn Statement which stabilised the financial markets will also have steadied the broader mortgage and housing markets.”
CEO of Octane Capital, Jonathan Samuels:
“The latest mortgage approval figures are an expected consequence of the many challenges facing the market right now. Indeed, a reduction in buyer appetite comes as no surprise in the context of a worsening cost of living crisis, runaway inflation, and continued economic uncertainty. For now at least.
“However, despite the doom and gloom, the figures may defy the harshest critics as they have not dropped off a cliff as such. Compared to historic levels for this time of year they are down 12% when compared with previous levels seen in the same month in 2017, 2018 and 2019.”
Conor Murphy, CEO, Smartr365:
“This morning’s numbers are indicative of the volatility we have recently been experiencing in the market – in the case of October, intensified by the impact of the ‘mini budget’ announced the previous month.
“The more recent Autumn Statement has substantially eased pressure on markets.
“Overall, the numbers remain robust and are a testament to the mortgage sector’s ongoing resilience. Key to maintaining this will continue to be instilling homebuyers with a sense of confidence – which the Stamp Duty cuts have gone some way to doing.
Director of Benham and Reeves, Marc von Grundherr:
“Although today’s mortgage figures will bring no cause for celebration, they are certainly no cause for alarm either, and the decline seen is almost certainly a consequence of a disastrous mini-budget which still lingers in the air while the market seeks to navigate multiple challenges.
“But we must factor in seasonality too whereby mortgage applications always begin to reduce at the onset of winter. As fixed rate mortgage costs continue to fall in Q1, expect to see a restoration of buyer demand.”