November 2017 marked the month when the base rate rose after 10 years of remaining at the same historically-low level. And as new figures have revealed, that month also marked the lowest number of new mortgages approved for over a year.
Trade body UK Finance revealed 39,507 mortgages were approved by banks in November last year. This represented a fall of 910 compared to the previous month. The figure was also 5% lower than the same time the previous year. While it is possible several factors were responsible for the drop, it cannot be denied the rise in the base rate was partially responsible.
Fixed-rate mortgages also increased
“The likelihood of an increase in the base rate led to a rise in the interest rates applied to many fixed-rate mortgages, even before the base rate rise was confirmed,” said Darren Pescod, CEO of The Mortgage Broker Limited. “While we saw further changes in the wake of the announcement, early moves to raise rates surely led to some would-be home buyers putting the brakes on their mortgage applications. We’ve seen the ‘wait and see’ approach applied many times before, and this could be yet another example of buyers wanting to see what happened before committing to a mortgage.”
Better news for first-time buyers in November
As we await the mortgage approval figures for December, we must consider the impact of the changes in stamp duty that were announced later in November. First-time buyers will now be exempt from paying stamp duty on properties worth less than £300,000.
“It’s likely some of those who hesitated to apply for mortgages earlier in the month will press ahead thanks to the positive news about stamp duty for first-time buyers,” Darren Pescod added. “I wouldn’t be surprised to see a rebound and a higher figure for mortgage approvals in December. With that said, the festive season can influence the numbers, too. Some may wish to wait until the New Year to get their applications in, so it may prove to be an uncertain end to 2017.”
The amount borrowed in November was far higher than in 2016
Despite the fall in applications made in November, the total amount borrowed went up significantly compared with the previous year. There was a rise of 13% year on year, according to official figures. This is promising, although indications suggest the housing market could well be sluggish in 2018. While price rises are likely to occur, estimates suggest they will be minimal. The London area may even see a fall in property prices.
As December’s figures become available soon, we should begin to see whether the abolishment of stamp duty for first-time buyers will have any notable effect. There is also the potential for the base rate to rise again, although Governor Mark Carney has suggested two more rises may occur over a three-year period. For the time being, at least, those looking for affordable mortgages are still on reasonably affordable ground.