Mortgage Approvals Plummet Amid Rising Interest Rates

Mortgage approvals have experienced a significant decline for the third consecutive month, with the Bank of England reporting a drop in September to 43,328 home loans approved— the lowest level since January. This downward trend reflects the effects of rising interest rates introduced as a measure against inflation since December 2021.

Remortgaging approvals also saw a substantial fall, dropping to 20,600—the lowest point since January 1999. These changes occur amid a persistent cost of living crisis and growing concerns regarding a potential recession and rising unemployment.

Consumer caution regarding unsecured credit has led to a decrease in net borrowing, which fell to nearly £1.4 billion in September, down from £1.7 billion in August. Gary Bush, a financial expert, noted the weak sentiment in the housing market and the challenging market conditions. He highlighted the competition among lenders offering lower fixed rates, juxtaposed with consumers’ difficulties in switching lenders due to affordability constraints.

Despite a easing of inflationary pressures, the Bank of England’s interest rate remains at 5.25%, up from just 0.1% in late 2021. The recent rate-setting meeting decided against a hike to 5.5% in September, a stance likely to persist despite warnings of a looming recession and fears of another crisis prompted by the bank’s aggressive rate increases.

The rising interest rates have raised concerns about affordability, prompting many people to remain with their current lenders. Financial adviser Gary Bush emphasized how consumer caution over unsecured credit has contributed to the decline in net borrowing, further impacting the housing market.

Nevertheless, October has brought lower fixed rates due to competitive pressure among lenders, instilling hope that no new economic crises are on the horizon.