Signs of a housing slump? Mortgage approvals fell 10% in September

The Bank of England has prompted new warnings of a housing market slowdown after revealing a ‘significant decrease’ in mortgage approvals for home purchase between August and September.

Its data showed house purchase approvals, an indicator of future borrowing and property market activity, decreased by 10.3% between August and September to 66,789.

The figure, however, remains above the six month average of 67,200 and is in line with monthly approvals for September before the pandemic.

Net borrowing of mortgage debt remained flat at £6.1bn in September but interest rates were higher.

The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 29 basis points to 2.84% in September, the largest monthly increase since December 2021 when interest rates began rising, the Bank of England said.

The rate on the outstanding stock of mortgages increased by seven basis points to 2.24%.

Karen Noye, mortgage expert at Quilter, suggested the signs that “a housing price dip if not crash” are starting to reveal themselves. 

She said: “If demand continues to come out of the market while people start to put their properties up for sale due to unaffordable mortgage or heating costs then we will see a natural reduction in price as it switches from a seller’s to a buyer’s market.

“Particularly as it starts to get colder, increased energy bills on top of eyewatering mortgages may make some homes simply unaffordable for people to stay in this winter.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, added: “These figures are already starting to reflect house buying intentions before the mini Budget of 23 September. 

“On the ground, the situation deteriorated further in the weeks following when uncertainty over mortgage payments came on top of worries about the increasing cost of living.

“Fortunately, most of those approvals are resulting in sales as buyers wish to take advantage of rates already secured which are unlikely to be repeated for some time. Mortgage rates are starting to come down too which has helped restore some of the lost demand albeit rather slowly but most sales are continuing, not collapsing.”