Mortgage approvals rise but buyers are facing ‘tricky landscape’

Mortgage approvals rose between April and May but are down by a quarter annually, underlining the uncertain market.

Bank of England data released yesterday shows there were 50,524 mortgage approvals during May 2023, up 1,504 or 3.1% for the month from 49,020 in April but down 23.7% annually.

It is the highest level of approvals since March of this year but the lowest since April, highlighting the turbulent market conditions that homebuyers are currently facing.

Commentators have been quick to point out that the figures are from before latest inflation data showed the cost of living measure remains high and was ahead of the latest round of mortgage repricing and latest interest rate rises.

Jonathan Samuels, chief executive of Octane Capital, said current market conditions are “erratic at best.”

He said: “This is largely due to the Bank of England’s decision to keep increasing interest rates, with buyers having to reassess their position in the market, only to return to find the goal posts have moved once again. 

“As a result, the number of approvals being seen from one month to the next is up and down like a yo-yo and this demonstrates the tricky landscape buyers are attempting to negotiate in order to climb the ladder.”

Jason Tebb, chief executive of OnTheMarket, said the figures underline the importance of agents and sellers pricing realistically.

He said: “With approvals for house purchases, an indicator of future borrowing, edging up slightly in May, these figures indicate continued caution among buyers in light of consecutive interest rate rises and the high cost of living.

“Stubborn inflation figures point to further rate rises, making affordability even more of an issue for those buyers relying on mortgages.

“With offers regularly being made below asking price, it is crucial that sellers price correctly in the first instance as being sensitive on price will speed up the time it takes to find a buyer." 

Lucian Cook, head of residential research at Savills, added: “It is worth remembering the marginal improvement in mortgage approvals for house purchase in May occurred in the run up to the recent repricing of debt. Even so it reflects a market which has become increasingly weighted to - and reliant upon - cash and equity rich buyers. 

“The June number will be more telling given the timeline of turbulence in the mortgage markets.  We’d expect to see greater focus on re-mortgaging at that point.”