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Mortgage approvals drop to lowest level in over a decade

Written by: Shekina Tuahene
Mortgage approvals for both house purchase and remortgage fell to their lowest levels in over 10 years in January.

The Money and Credit statistics from the Bank of England (BoE) showed that there were 39,637 house purchase approvals during the month at a value of £8.8bn, down from 40,540 in December. Excluding the impact of Covid-19 on the mortgage and housing market, the last time house purchase approvals were lower was in January 2009 when they totalled 32,400. 

Remortgage approvals came to 25,357 at a value of £5.3bn. This was slightly down on the previous month’s 25,228. The last time remortgage approvals were lower was in July 2012, when they reached 24,400. 

Figures were down when compared to January last year, which saw 73,992 house purchase approvals and 46,233 remortgage approvals. 

Approval volumes were also lower than the equivalent pre-pandemic period, as January 2019 recorded 66,766 approvals for house purchase and 50,377 for remortgage. 

Myron Jobson, Senior Personal Finance Analyst, interactive investor, said: “Mortgage approvals dipped for the fifth consecutive month in January, providing further evidence of weakened demand as higher mortgage rates and the cost-of-living storm bites. While mortgage rates have edged down recently, they are in some cases more than double than they were this time last year.

“However, there are signs that housing market activity may be close to a trough. The biggest annual fall in home prices in over a decade and a seemingly growing willingess from sellers to accept huge discounts on asking prices to get sales through bodes well for buyer demand.”

Charlotte Nixon, mortgage expert at Quilter was more cautious in her assessment.

She said: “We may see the number of mortgage approvals improve next month as people take advantage of lenders lowering prices to try and entice more people to market.

“However, despite it being technically the first day of spring, we are still not through the cold months yet and people will be suffering with high energy costs alongside higher mortgage rates. This may make people think twice before opting to move home and suffer all the costs that go with that.”

Industry reaction

There were mixed reactions from those in the mortgage industry.

Simon Webb, managing director of capital markets and finance at LiveMore, said: “This is the fifth consecutive month approvals have dropped and is almost half of the 74,400 that went through last August. 

“Uncertainty remains in the housing market as supply and demand slows with less people looking to both buy and sell. Although mortgage rates are stabilising, there is no let-up in the high cost of living, which will put some people off making large financial commitments like buying a house.” 

However, there were others that were more optimistic about the results.

John Phillips, national operations director at Just Mortgages, said: “There are many that think my continuing optimism in the housing market is unfounded but with house prices rising by 9.8% in the 12 months to December 2022, a slowdown in lending is not a disaster and a long way from being a crisis.” 

Lisa Martin, development director at TMA Club, also said found reasons to cheerful. 

She said: “Not only has demand been greater than expected in the early stages of this year, but competition between lenders has driven down mortgage rates with the average five-year fixed falling below 4% in early February for the first time since the government’s mini Budget.  

“While an unpredictable market means we may see rates start to rise again, as a result of the short-term swap rates rising, rates are, at present, relatively low compared to recent history.”

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