Mortgage lending falls to lowest since June 2020

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Mortgage approvals fell a fifth in November to the lowest since June 2020 as buyers reconsidered home purchases

  • Mortgage approvals fell from 57,875 in October to 46,075 in November
  • Experts say the slowdown is due to buyers ‘stocking up’ the market amid rising rates
  • The choice of mortgage products fell by 32% compared to January last year

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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.

Mortgage approvals and remortgage approvals fell month-over-month in November

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.

What to do if you need a mortgage

Borrowers who need to find a mortgage because their current fixed-rate contract is about to expire, or because they have agreed on a home purchase, should explore their options as soon as possible.

This is Money’s best mortgage interest calculator powered by L&C that can show you deals that match your mortgage and property value

What if I have to borrow again?

Borrowers should compare rates and speak with a mortgage broker and be prepared to trade to secure a rate.

Anyone with a fixed-rate deal expiring in the next six to nine months should research how much it would cost them to re-mortgage now — and consider getting a new deal.

Most mortgage agreements allow fees to be added to the loan and are not charged until it is closed. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I buy a house?

Those with an agreed home purchase should also aim to secure rates as soon as possible so they know exactly what their monthly payments will be.

Homebuyers should be careful not to overextend themselves and be prepared for the possibility that house prices could fall from their current highs, due to higher mortgage rates limiting people’s borrowing capacity.

Compare mortgage payments

The best way to compare mortgage rates and find the right deal for you is to talk to a good real estate agent.

You can use our best mortgage interest calculator to display deals that match your home value, mortgage size, term and fixed interest needs.

However, bear in mind that rates can change quickly, so if you need a mortgage it’s advice to compare rates and then speak to an estate agent as soon as possible so they can help you find the right one mortgage for you.

> Check out the best fixed rate mortgages you can apply for

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