Despite reduced approval figures, there are signs of improvement in the market
Approvals for mortgages have fallen to their lowest level since May 2020, with the rising interest rate environment playing its part, resulting in declining buyer confidence.
The number of home loan approvals dropped to 35,600 in December from 46,200 in November, which represented the fourth consecutive monthly decline.
Excluding the pandemic and its immediate aftermath, the total number of approvals seen in December was the lowest since January 2009, when the economy was deep in recession following the global financial crisis.
Kim Balasubramaniam (pictured), senior mortgage broker at The Mortgage Mum, said the mini budget caused a great degree of unrest in the mortgage market which contributed to a decline in buyer confidence, therefore impacting approval figures.
However, she believes there have been positive signs since the beginning of 2023, with stability slowly creeping back into the market.
Mortgage demand – reduced approvals
“The mini budget of September 2022 saw historic rises in fixed rate mortgage products and undoubtedly caused a great deal of panic and uncertainty in consumers,” Balasubramaniam said.
She added that the market witnessed chains collapse, as both vendors and purchasers were unwilling to commit to larger mortgages and the thought of over-paying for a home ahead of a touted plummet in house prices.
During this time, Balasubramaniam said many homeowners looking to remortgage were reticent to commit to a new deal in what they saw as an incredibly turbulent market, instead deciding to wait and see what happened in the latter part of 2022 and going into the New Year.
“This, coupled with the rising cost-of-living and decreased affordability calculations from many lenders, and saw mortgage approval rates slump to the lowest level since the pandemic,” she recounted.
Mortgage demand – signs of improvement
However, since then, Balasubramaniam said she has seen lenders reduce rates considerably, particularly for those with lower loan-to-values (LTVs).
Balasubramaniam said the market feels much more stable now, with the first two months of 2023 certainly seeing a huge increase in enquiries, particularly from remortgage clients and first-time buyers.
“I have also seen less down valuations, perhaps a sign that house prices are now more realistic than during the early part of last year,” she added.
Balasubramaniam believes brokers need to ensure their clients are well educated about the current financial circumstances the market is enduring.
“A more stable market and decreasing fixed rates does not harness quite the same media attention as the post mini budget meltdown, so we are the ones who have the ability to reach our audiences with this more positive news,” she said.
Balasubramaniam said that as many lenders will now also let customers switch to a lower rate between offer and completion, brokers can reassure them that if they looking to remortgage in the next six months, even post-offer, intermediaries will continue to monitor their case and switch their rate if it is in the customer’s best interest and the lender allows.
From personal experience, Balasubramaniam said many clients have welcomed this ability to have the security that they have on offer, as well as knowing they will not be paying over the odds when it comes to their completion date.
“Overall, if the first two months are anything to go by in 2023, consumer confidence seems to have increased and I am cautiously optimistic that the approval rates will do so too soon,” Balasubramaniam said.
Why do you believe approvals for mortgages have fallen to their lowest level since 2020? Let us know in the comment section below.
