Borrowing of mortgage debt by individuals continued to decline
Net mortgage approvals for house purchases decreased from 51,500 in March to 48,700 in April, data published by the Bank of England (BoE) on Thursday has shown.
The drop in net approvals – an indicator of future borrowing – broke the trend of successive rises in the previous two months, which came after five consecutive monthly decreases in approvals for house purchases.
Approvals for remortgaging, which only capture remortgaging with a different lender, increased slightly from 32,200 in March to 32,500 in April.
The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages rose by five basis points, to 4.46% in April.
The central bank’s latest Money and Credit report also showed that borrowing of mortgage debt by individuals continued to decline from net zero in March to £1.4 billion of net repayments in April. The BoE said this is the lowest level on record, if the period since the onset of the COVID-19 pandemic is excluded.
“Today’s drop in mortgage approvals combined with inflation running at higher-than-expected levels suggests a recovery is further away than anticipated,” Steve Seal, chief executive at Bluestone Mortgages, commented. “As inflationary pressures persist, affordability challenges will remain prevalent for borrowers and prospective buyers alike.”
Emma Cox, managing director of real estate at Shawbrook, added that buyer confidence remains diminished as a further interest rate hike and year-on-year house price growth have suppressed demand.
“Those who still plan to progress with their property plans are likely to be keen to act swiftly to conclude deals and limit the risk of further base rate increases,” Cox said. “Homeowners too will be keen to push on with remortgage plans, ahead of a further possible rate hike.
“Landlords seeking to diversify their portfolios will also be looking to act quickly to mitigate the risks of current market uncertainty, and benefit while rental demand remains high. There are opportunities to capitalise on, with some landlords reportedly leaving the market and professional landlords being likely to want to make the most of these. As well as restoring a sense of balance to the market, this should bring with it an injection of quality, much needed rental stock.”
Tomer Aboody, director at property lender MT Finance, said the lower mortgage approvals in April were disappointing, indicating that there was less confidence in the market than seemed to be the case as recently as the previous month.
“Transactions are also down compared with where we were before the pandemic, so some assistance from the government in order to boost the market and encourage a pick-up in volumes is now required,” he pointed out.
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