Approvals for remortgaging hit 24-year low
Mortgage approvals for house purchases fell to the lowest level since January this year, while approvals for remortgaging plunged even more – its lowest since January 1999.
The Bank of England (BoE) has reported a decrease in net mortgage approvals for house purchases, from 45,400 in August to 43,300 in September.
Net approvals for remortgaging dropped from 25,000 to 20,600 during the same period, hitting the lowest level of remortgaging approvals in nearly a quarter of a century.
The BoE’s latest Money and Credit report also showed a decrease in net borrowing of mortgage debt by individuals, from £1.1 billion in August to -£0.9 billion in September – the lowest since April 2023.
Gross lending fell from £19.4 billion in August to £18.6 billion in September, while gross repayments rose from £19.0 billion to £19.5 billion over the same period.
The ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages saw a 19-basis point increase and now sits at 5.01%. The rate on the outstanding stock of mortgages saw an 8-basis point increase, from 3.06% in August to 3.14% in September.
“Following a sharp fall in consumer confidence, it’s no surprise that mortgage approvals have sunk as consumers continue to battle affordability challenges,” commented Steve Seal, chief executive at Bluestone Mortgages. “However, with expectations for homebuyer and homeowner support in the upcoming Autumn Statement, this could signal that hope is on the horizon.”
Joe Pepper, chief executive at PEXA UK, said the BoE figures continued to demonstrate “relatively poor housing market sentiment” as buyers, homeowners, and lenders digested the impact of 14 consecutive interest rate hikes.
“And while it’s possible that we have seen rates peak, this weak data shows that we are far from out of the woods,” Pepper pointed out. “What is clear is that this unprecedented interest rate spiral has taken compounded the cost-of-living crisis for hundreds of thousands of consumers.
“The good news is that we have seen a flurry of lenders competitively repricing their fixed-rate deals in attempt to stir activity. This is likely to help stimulate remortgage activity.”
Simon Webb, managing director of capital markets and finance at LiveMore, noted that the sharp fall in net mortgage lending in September was in stark contrast to the previous four months, where net lending increased.
“However, a fall was expected as mortgage approvals have been declining for the past three months as less people consider moving home,” Webb added. “House prices are coming down and there is more housing stock on the market, but higher interest rates are putting people off during a cost-of-living crisis.
“Remortgaging to a different lender is down to its lowest figure in almost 25 years, which I suspect means product transfer numbers are higher. It is easier for borrowers to stay with their current lender as they do not have to go through the affordability assessment in the same way that a remortgage requires.”
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