UK Mortgage Approvals Fall Amid Widespread Uncertainty

While UK house price growth continues to slow, other figures suggest that slowdown will continue. The latest figures from the Bank of England (BOE) show the number of mortgages that lenders have approved, fell for a third straight month in April as demand for property wanes.

Specifically, the BOE data show there were 64,645 mortgage approvals in April. That’s down from March’s 66,043 and the lowest level since September 2016. Mortgage approvals are a good forward indicator of housing activity and prices in the coming months and this fall doesn’t bode well for either.

The BOE also reported that mortgage lending slipped back too. Net mortgage lending totalled £2.73 billion in April, down from £3.05 billion in March and was also the lowest total in a year. While this data is more backward looking, it’s in line with the house price inflation slowdowns and reports that house prices have fallen on a monthly basis.

Politics, Brexit and Affordability

There have been three main reasons behind the latest weakening housing market:

  • The June 7 Election.
  • How Brexit will affect the economy.
  • Stretched affordability as house price remain high compared with average earnings.

The first two have brought much uncertainty to investors and home movers in particular. Many home-owners have opted to stay put before making such an expensive move, when they’re uncertain of what the future holds for them.

Affordability, meanwhile, has been stretched for some time. However, there are signs that it could be improving slowly, as house price inflation continues to slow and move closer to the pace of average earnings.

A separate survey from the Royal Institution of Chartered Surveyors (RICS) also paints a picture of weaker demand for property amid uncertainty.

“The latest survey suggests that uncertainty related to the General Election may have contributed to what appears to have been a disappointing level of transactions in the housing market over the spring,” said the RICS chief economist, Simon Rubinsohn.

Buyers Must Be Mortgage Ready

While uncertain home buyers and sellers mar the UK’s housing market, global property management firm and upmarket estate agency, Knight Frank has highlighted the importance of buyers being mortgage ready, if they do take the big decision to buy a property.

With so many potential reasons to stifle a property sale, buyers must ensure their mortgage isn’t one of them. At the moment, there are some excellent mortgage interest rates available.

According to BOE figures, the average mortgage interest rate for a 2-year, 75% LTV fixed-rate was 1.47% in May. Meanwhile, the average rate for a five-year, 75% LTV fixed rate mortgage was 2.03% - the lowest rate on record.

With those kinds of rates still available, it would definitely be prudent for committed home-buyers to secure the best deal they can, in good time for a property purchase.

“In this type of market, it is very important for prospective home buyers to be “mortgage-ready”,” said Knight Frank’s Simon Gammon in a blog post. “The significant increase in paperwork needed to secure a home loan these days mean that you need to be prepared.”