Mortgage approvals indicate cooling housing market

Mortgage approvals are falling from the heady heights of the past 12 months, signalling that the market is running at a steadier pace, the Bank of England’s Money and Credit data shows.

Some 74,453 loans were approved for house purchase in August, down from a previous six-month average of 82,719.

Gross mortgage borrowing stood at £21.5bn in July, which is a significant recovery from the £16.6bn in July.

However it’s still well below the spike in lending in June, when £43.6bn was borrowed shortly before the minimum stamp duty threshold moved from £500,000 to £250,000.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “As always, mortgage approvals are a good lead indicator of purchasing intentions.

“However, because they reflect decisions made in the period leading up to August, they show demand remaining relatively healthy even though the final stamp duty holiday and furlough deadlines were looming large.

“We are finding that activity has reduced since but certainly not fallen off a cliff, so expect fairly consistent mortgage approval numbers for the rest of the year at least.”

Tomer Aboody, director of property lender MT Finance, said: “Although mortgage approvals were slightly down in August, they are still above pre-pandemic times. The strength of the market further demonstrates buyer confidence, as well as a desire to take advantage of the low interest rate environment. This is further demonstrated by the remortgage market, where borrowers are keen to switch to a cheap fixed-rate mortgage and make the most of lenders’ appetite to lend.

“The upwards trajectory of the market is set to continue for the foreseeable future while borrowing remains cheap, even though the stamp duty holiday is about to end.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “August proved to be quieter for the housing market compared with the relative frenzy of previous months, with many people putting their property searches on hold and going on holiday.

“Mortgage rates continue to fall as lenders, awash with cash, compete for business, which should help support the market into the autumn. Indeed, we are finding that September is proving to be a record-breaking month with plenty going on as buyers continue to search for more space, both inside and out.”

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