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Housing market in ‘significant slowdown’ as approvals tumble

Nick Cheek
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Nick Cheek

The number of mortgages approved by lenders dropped to its lowest level since May 2020, while Brits borrowed an extra £500m on credit card in December, figures from the Bank of England reveal.

The Bank’s Money & Credit report found that 35,600 mortgages were approved in December, down from 46,200 in November. That’s the fourth straight month in which purchase mortgage approvals have declined.

However, if the pandemic period is excluded, this is the lowest level since January 2009, the Bank noted.

Approvals for remortgages also fell over the month, from 32,600 to 26,100 which is the lowest level registered since January 2013.

According to the Bank of England report, net borrowing of mortgage debt dropped from £4.3bn in November to £3.2bn in December, while gross lending dropped to £23.3bn from £25.1bn.

A significant slowdown

The Bank of England figures show that the housing market is now “in the midst of a significant slowdown”, according to Karen Noye, mortgage expert at Quilter.

She noted that with various household costs increasing at the moment, we may be reaching a time where people begin to put their homes up for sale in favour of one which will be cheaper in terms of the monthly bills.

Noye said: “House prices have started to fall in recent months, and should the level of demand continue to decrease at the same time more people put their homes on the market, we will likely see this trend continue and a switch from the seller’s market to a buyer’s market could materialise.”

However, Mark Harris, chief executive of SPF Private Clients, said that while the figures appear “rather gloomy” at first, there is reason to be optimistic.

He said: “Thankfully, the situation has significantly eased for borrowers since the mini Budget fallout. Lenders continue to chip away at fixed-rate mortgage pricing and it won’t be long before the psychological 4% barrier is breached, making fixes considerably more attractive than they were just a few weeks ago.”

Credit card borrowing and household savings

The December report also revealed that people borrowed an additional £500m in consumer credit, on net, compared with £1.5bn borrowed in November. The Bank said that credit card repayments of £500m were “more than offset by £1bn of borrowing through other forms of consumer credit”.

However, £1bn of borrowing was made through other forms of credit, such as car finance and personal loans, which it said was the highest since October 2019.

It noted that the December figure was lower than the previous six-month average of £1.2bn.

Meanwhile, the effective interest rate on interest-charging overdrafts in December fell by 116 basis points, to 19.77%, but rates on new personal loans increased 29 basis points to 8.16%.

Elsewhere, the Bank revealed that households deposited an additional £3.9bn with banks and building societies, down from £3.9bn in November.