Mortgage Approvals Dip Lower in October

Mortgage approvals took another tumble in October – this time leading to the lowest level of approvals in 13 months. September saw 41,576 approvals for house purchases, while October saw a fall to 40,488 – a difference of 1,088. Some experts think this figure could dip further still in the coming months, given the signs that are coming to the fore.

Is the housing market beginning a prolonged decline?

Some think it is. The rise in the base rate recently, albeit only by 0.25%, is not likely to help matters. Furthermore, people are being knocked from all sides by lacklustre wage increases and rising prices. This means they have less surplus cash each month than before – and that in turn provides a much smaller cushion against more potential rate rises in the future.

Black Friday or Bleak Friday?

While many people were prepared for huge sales on Black Friday, the ever-increasing hesitancy to spend seemed to underpin a quieter time than was expected. Just as mortgage borrowing fell, so too did consumer credit. This was shown to dip from 5.5% in September to 5.1% in October. Those who are hesitant to spend money are also more likely to postpone major buying decisions – not least moving home.

A deepening downturn?

“The drop in mortgage approvals isn’t a huge surprise, given the way things have been trending over the past few months,” said Darren Pescod, CEO of The Mortgage Broker Ltd. “While some are clearly still managing to get a mortgage and buy their own property, many are holding off, wary of further rate rises and squeezed wages.

“The biggest jump was seen in the figures for remortgaging in October. It was well-publicised that a rate rise was on the cards, and that led to an 11.6% increase in remortgaging activity in October compared with the month before. Comparing the figures to the same time last year, the jump is even more noticeable, coming in 37% higher than it was then.”

Will changes in stamp duty make any difference?

All eyes were on the Budget last week to see if the Chancellor would give any relief to the housing market. First-time buyers were handed a lifeline, with no stamp duty payable on properties worth up to £300,000 when purchased in England and Northern Ireland. The rules will apply in Wales until March 2018, at which point stamp duty will be devolved to the Welsh government. Scotland works using a different system so this will likely not apply there.

It is estimated house prices will rise by 0.3% inside a year because of the stamp duty change. The Office for Budget Responsibility (ONS) also gauged around 3,500 more properties would be purchased by first-time buyers because of the changes.

“It’s too early to say how significant the change in stamp duty will be for the market as a whole,” Darren Pescod added. “However, given all the signs, it seems likely we are still going to see a downturn in the housing market very soon.”

Published on 23 July 2020

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