However net borrowing of mortgage debt increased
The value of mortgage borrowing increased in August, while net mortgage approvals and remortgaging approvals both decreased in the month, according to the latest figures from the Bank of England.
Net borrowing of mortgage debt by individuals rose to £4.4 billion in August, up from £4.1 billion in July, below the previous 6-month average of £5.2 billion. The annual growth rate for net mortgage lending remained unchanged at 3.6% in August.
Meanwhile, net mortgage approvals for house purchases fell to 54,900 in August, down from 55,900 in July and below an average of around 60,100 over the previous six months. Approvals for remortgaging decreased to 34,000 in August, from 34,600 in July.
Meanwhile, the effective interest rate paid on new mortgages jumped again to 4.60%, while the rate on the outstanding stock of mortgages edged up to 4%.
Battling headwinds
John Phillips, CEO of Just Mortgages and Spicerhaart, said the drop wasn’t a surprise. “Given it is prime holiday season, we shouldn’t be too surprised to see mortgage approvals dip in August – especially when you also consider the headwinds the market has been battling.”
He said he had witnessed positive signs this month. “We’ve been encouraged by a modest uplift in buyer registrations and valuation requests in September. It’s a good sign that there are still people out there looking to make moves and to buy.”
Meanwhile, Jeremy Leaf, north London estate agent and a former RICS residential chairman, said the figures were a useful forecast. “These numbers are particularly interesting as they are likely to prove a reliable indicator of buyer intent and activity levels in the period up to Christmas.
“Approvals may have slipped a little, but, on the other hand, net borrowing has gone up so on balance we see buyers and sellers defying the doom mongers and getting on with moving plans, despite nagging worries about rising mortgage costs and inflation. However, we have noticed on the ground that the time taken to arrange finance for property purchases is increasing, which may also be contributing to lower approval numbers.”
Jason Tebb, President of OnTheMarket, said: “Perhaps unsurprisingly, given the distractions of the particularly hot summer, approvals for house purchases dipped again in August, following July’s fall. They remain below the previous six-month average as ongoing political and economic uncertainty also has an impact on buyer and seller decision-making.
With the effective interest rate on newly drawn mortgages also increasing again, to 4.60 per cent in August from 4.45 per cent in July, the impact of higher borrowing costs is making itself felt. The Bank of England’s decision to hold base rate steady at recent meetings will help calm concerns assuming this approach continues into the autumn.
The introduction of a government-backed scheme to help first-time buyers in the budget could provide some much-needed impetus for the housing market, although indications show it would be restricted to new homes only. Nonetheless,we await the details with interest.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Mortgage approvals fell again in August and remain below the six-month average, illustrating the concerns and difficulties facing buyers.”
On the ground, some lenders have been increasing pricing in response to volatility in Swap rates, which underpin the pricing of mortgages. However, Swap rates have flattened in recent days and the hope is that this trend will persist, with mortgage pricing settling down.
