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The UK's housing market has taken a hit as mortgage approvals hit their lowest level in six months.
According to data released by the Bank of England, net mortgage approvals for house purchases fell from 49,500 in July to 45,400 in August.
This drop of 8% is being attributed to the impact of consistently rising interest rates, which have been on the ascent since December 2021, but were held for the first time on the 21st September 2023.
The decline in mortgage approvals is significant, with the figures down by a third compared to August of the previous year. This sharp drop suggests that the 14 interest rate hikes in the UK over the past two years have begun to affect the demand for homes.
Net approvals for remortgaging also experienced a substantial decrease from 39,300 in July to 25,000 in August, marking the lowest level since July 2012.
Alice Haine, Bestinvest’s personal finance analyst said “The decline in mortgage approvals – a forward-looking indicator – signalled that mortgage lending is likely to remain weak in the final months of this year as cost-of-living pressures and high borrowing costs make it harder for buyers to secure the homes they want.” She added, “However, there is a hint of optimism in the air with estate agents reporting a rise in enquiries”.
In addition to the decrease in mortgage approvals, separate figures from HMRC revealed that house sales in August were down by 16% compared to the same month in 2022. However, there was a slight 1% increase compared to July 2023, suggesting that cash buyers, who do not rely on mortgages, are preventing a more significant downturn in the market.
Mortgage brokers, are likely to experience shifts in their work dynamics due to the evolving housing market. They may need to look out for other opportunities to ensure they continue to generate business.
Overall, mortgage brokers may need to broaden their service offerings and tailor their strategies to thrive in this evolving landscape.
