Mortgage lending falls to lowest since June 2020

Mortgage approvals fell by a fifth from October to November last year as potential buyers paused to “take stock” amid the cost of living crisis and high mortgage rates.

There were around 46,075 mortgage approvals in November, the lowest number since June 2020, according to the latest data from the Bank of England.

This is down from 57,875 in October and 68,969 in November 2021 – a 33 percent year-on-year decline.

Commenting on the figures, Gareth Lewis, commercial director of real estate provider MT Finance, said: ‘These figures clearly show the tightness consumers are facing.

“Purchase approvals have declined, showing that many people stopped and took stock in November as rates continued to rise, wondering how high they would go and whether they could afford the purchase they were considering.

“Those who aren’t forced to move may wonder if they should postpone that purchase for the time being and wait for the outlook to become clearer.”

Tom Bill, head of UK residential research at Knight Frank, added: ‘Rates are falling again, but are still several percentage points higher than at this time last year.

“Price cuts will become more widespread and sales volumes will come under pressure later this year as more buyers recalculate their financial position, but the downward trajectory will be milder than ever in the chaotic final quarter of 2022.”

Data from the Bank of England shows how quickly mortgage approvals have fallen since the end of the summer

For those who need a mortgage, cost increases have been significant in recent months.

First-time buyers may find it more difficult to get mortgage approval, as higher interest rates combined with the cost-of-living crisis and higher rents put additional strain on household finances.

Currently, the average two-year fixed rate mortgage for all LTVs is 5.78 percent and with the average five-year rate fixation is 5.62 percent. A year ago that was 2.65 percent and 2.88 percent respectively.

>> Compare rates and find the best mortgage for you with the This is Money tool

In the aftermath of the disastrous ‘mini-Budget’ in September, mortgage rates rose rapidly last year

The rapid increase in rates has also affected those looking to take out a new mortgage. Remortgage approvals were down 37 percent in November compared to the previous month and 30 percent compared to November 2021.

Half of UK homeowners have fixed rate mortgages due within the next two years. While rates are now falling from their fall highs, many of these borrowers will likely still see their monthly payments rise significantly — at a time when incomes are already under pressure.

At the same time, the number of mortgage products available to borrowers has fallen by almost a third compared to the same time last year.

Currently, there are 3,654 residential mortgage products on the market across all loan-to-value ratios, down 32 percent from the same date last year, according to data from Moneyfacts.

Anil Mistry, director and mortgage broker at RNR Mortgage Solutions, said some lenders had stopped their 5 percent mortgages because they expected house prices to fall and wanted to avoid the risk of negative equity.

At the same time, First Direct has launched a range of best-buy fixed-rate mortgages offering loans for first-time buyers, movers and those looking to re-mortgage.

The new range includes reduced-interest loans at 60 and 75 percent with loan-to-value ratios ranging from 4.29 percent to 5.19 percent.