The Bank of England’s Money and Credit data for July showed there were 49,444 mortgages approved for the purpose of a house purchase down from 54,605 the month before. 

The value of purchase mortgages approved in July came to £11bn. 

Despite the month-on-month decline, purchase approvals were slightly higher than the previous six-month average of 48,594. 

Approvals for remortgage increased marginally from 39,079 in June to 39,250 in July at a total value of £8.1bn. Approval volumes were also elevated when compared to 34,016 in May and 32,792 in April. 

Remortgage approvals were also markedly higher than the previous six-month average of 31,958.  In total, 96,854 mortgages were approved in July. 

Dented buyer confidence 

Steve Seal, CEO of Bluestone Mortgages, said with mortgage repayments exceeding rents for the first time in more than a decade, it was “hardly surprising to see a dip in mortgage approvals”. 

Advisers said the fall in approvals reflected what they were seeing within their businesses. 

Samuel Mather-Holgate, independent financial adviser at Mather and Murray Financial, said: “You have more chance of finding Nadine Dorries in mid-Beds than a buyer for your house in today’s market.  

“The property sector continues to falter as rate rises suck all of the confidence out of the market. Sellers are having to slash their prices, and those that don’t are hanging around on property portals like rotting meat in the desert.” 

First-time buyer interest 

Although buyer demand has been suppressed, some advisers noted that determined first-time buyers were still active in the market. 

Mather-Holgate added: “There is a small amount of activity amongst first-time buyers who can snap up bargains currently. Those who have saved for their deposits have the discipline to meet higher mortgage costs.” 

Adam Oldfield, chief revenue officer at Phoebus Software, said the continued fall in house prices could result in a rise in purchase approvals, particularly if wages keep pace with inflation.

He added: “As we head into the final months of the year, lenders will no doubt be looking to hit their lending targets, which could mean we see some more favourable mortgage deals. 

“If, as I suspect, lenders have to fight for business this may add fuel to the fire, and we could see an upturn in the market towards the end of the year. Of course, for lenders it will be a juggling act. Hitting lending targets with one eye on long-term affordability, to ensure protection for the most exposed borrowers. Recent arrears figures can’t be ignored, they will have to be managed.” 

Rise in average rates 

Gross repayments fell from £19.7bn to £19.1bn while net borrowing of mortgage debt rose for the third month in a row to £200m. This was a £100m increase compared to the previous month. The interest rate paid on newly drawn mortgages rose by 0.03% to 4.66% in July, while the rate on outstanding mortgages increased by 0.05% to 2.97%. 

Charlotte Nixon, mortgage expert at Quilter, said while there was only a “modest increase” in the effective interest rate on new mortgages, “the broader implications for the housing market are clear”. 

She added: “The Bank of England may be poised to adjust rates again in its next meeting. Amidst inflationary pressures, the prospect of additional rate hikes later this year cannot be entirely dismissed. The intricate dance of interest rates undeniably casts its shadow over property transactions, which will feed through to house prices.” 

Mark Harris, chief executive of SPF Private Clients, said: “The worst of the pain may not be over with the markets expecting the Bank of England to raise the base rate again next month. 

“Swap rates, which underpin the pricing of fixed-rate mortgages, and have been exceptionally volatile in the past couple of months, have settled down since the encouraging dip in inflation. A number of lenders have been reducing their fixed rates and borrowers will be hoping others follow suit in coming weeks.”