‘This is not Armageddon:’ Agents react to drop in mortgage approvals

New mortgage lending data from the Bank of England has indicated a slowdown in property market activity during October but agents remain unconcerned.

The number of mortgage approvals for home purchase dropped in October and those who are borrowing are now paying higher rates, Bank of England figures have revealed.

Mortgage approvals for house purchase, an indicator of future borrowing and property demand, decreased from 66,800 in September to 58,977 last month.

It is also down on the 69,489 of mortgage approvals during October 2021 and has fallen below the previous six-month average.

The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 25 basis points to 3.09% in October, the Bank of England said.

Tom Bill, head of UK residential research at Knight Frank, said the number of mortgages issued in the month following the mini-Budget was the lowest since the early days of the pandemic.

But he said it “is not a huge surprise,” adding: “We don’t believe October was a cliff-edge moment for the UK housing market though. 

“Swap rates have returned to where they were in mid-September, which will filter through to lower mortgage costs even as the Bank of England raises the base rate. 

“However, as a new lending landscape emerges after 13 years of ultra-low rates, we believe prices will fall by around 10% over the next two years. There will be more downwards pressure on prices after Christmas as cheaper mortgage offers made before the mini-Budget work their way through the system.”

James Forrester, managing director of estate agent Barrows and Forrester, , added: “The decline in approvals and monies actually lent is the latest dent to property market sentiment and is almost certainly down to a Government that will be heavily featured on Santa's naughty list this year. 

“However, we also need to remember that the decline towards pre-pandemic normality is expected and in part due to the influence of a seasonal market slow down. Armageddon this is not."

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said the figures could have been worse.

He added: "These comprehensive figures, though reflecting buying decisions made over the previous few months or so, always provide an indication of future direction of travel for housing activity.

"On the one hand, we are starting to appreciate the size of the missile which hit the market soon after the mini-Budget. But also, lack of a sharper fall demonstrates the determination of many to continue with their agreed sales despite the rising cost of living and mortgages in particular, which we have certainly witnessed in our offices."

Jason Tebb, chief executive of OnTheMarket, said sentiment remains robust among buyers and sellers, adding: “With interest rates and the cost of living continuing to rise, buyers may have less buying power but even in challenging markets, people need to move. Sellers should take advice from experienced local agents and price realistically or may find their properties stick on the market.”