The month of April witnessed a decrease in mortgage approvals, with figures falling short of the previous month’s count. According to data released by the Bank of England, approvals dropped to 48,700, down from the 51,500 seen in March, indicating a renewed decline in the market after two months of modest growth. However, the number of approvals for remortgaging experienced a slight uptick from 32,200 to 32,500 during the same period.
Excluding the period following the onset of the pandemic, the overall value of net mortgage debt has reached its lowest level on record. The Bank of England’s statistics reveal that individual borrowing for mortgage debt declined from a net zero in March to £1.4 billion in net repayments in April.
Additionally, the figures disclose that the “effective” interest rate, the actual interest paid on newly drawn mortgages, rose by 5 basis points to 4.46% in April.
Timur Abode, Director at MT Finance, expressed disappointment at the lower mortgage approvals in April, suggesting a lack of confidence in the market compared to the previous month. Abode emphasized the need for government assistance to stimulate the market and encourage an increase in transaction volumes, particularly since transactions remain lower than pre-pandemic levels.
Mark Harris, CEO of SPF Private Clients, attributed the decline in mortgage approvals to buyer concerns about the wider economy and affordability. Harris also noted that the average rate on new mortgages continued to rise, increasing by 5 basis points to 4.46%. He warned that the worst may not be over, as another quarter-point rate rise is expected this month due to inflation proving more stubborn than initially forecast by the Bank of England.
Hina Bhudia, Partner at Knight Frank Finance, predicted that interest rates would continue to rise, anticipating that the Bank of England base rate would need to go significantly higher than its current level of 4.5%. Bhudia highlighted that while borrowers could still secure five-year fixed rate products below 4.5%, the opportunity might be short-lived, with leading two-year fixed rate products approaching 4.75%. She stressed the uncertainty surrounding mortgage rates.
Jeremy Leaf, former Chairman of RICS residential and a north London estate agent, highlighted the slip in net mortgage approvals for house purchases as the key point of concern. Leaf observed that buyer caution has increased compared to earlier in the year, impacting decisions made a few months prior.
Emma Cox, Managing Director of Real Estate at Shawbrook Bank, attributed the diminished buyer confidence to expectations of another interest rate hike and the year-on-year growth in house prices, both of which have suppressed demand. Cox noted that those still pursuing their property plans would be eager to swiftly conclude deals to mitigate the risk of further base rate increases. Homeowners, too, would be keen on advancing their remortgaging plans ahead of a potential rate hike.