Data has shown that mortgage approvals have soared in the UK as borrowers rush to secure loans before interest rates increase again. There have been warnings of increasing ‘headwinds’ in the property market, which is showing signs of a slowdown stemming from soaring inflation, interest rate hikes, and the economic issues brought about by the recent mini-budget from the chancellor, Kwasi Kwarteng.
A series of interest rate hikes since December 2021 have seen the base rate rise to 2.25%. The chancellor’s mini-budget has increased the chances of further rate increases, meaning huge numbers of consumers could be left facing even higher mortgage costs. With the Bank of England making it clear that it will take aggressive action about interest rates, the number of borrowers looking to secure mortgage loans has increased.
The Money and Credit report from the Bank of England shows that around 74,300 mortgage approvals were logged in August. This was an increase of 16% compared to the previous month. While there has been a recent drop in mortgage approval numbers, the August figure is the highest since January, when 74,500 mortgages were approved.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The sudden leap in house purchase mortgage approvals in August to their highest level since January likely reflects people attempting to secure loans ahead of expected increases in mortgage rates, rather than a fundamental strengthening of demand.”
Almas Uddin from Revolution Brokers said there had been increases in mortgage approvals over recent months despite increases in mortgage rates. He said: “This has been spurred by a sense of urgency from the nation’s home-buyers, who are keen to secure what remain fairly reasonable rates in anticipation of further increases to come this year.”
According to another industry official, Robert Gardner from Nationwide, headwinds continue to gain momentum, suggesting we’ll see a further slowing of the property market in the coming months.
Market volatility has wiped out stamp duty cuts
As part of his mini-budget, the chancellor announced stamp duty changes, including an exemption on properties up to £250,000, increasing to £425,000 for first-time buyers.
However, industry officials said that since the mini-budget, there had been a ‘tsunami of market volatility,’ which has effectively wiped out the stamp duty cuts that the chancellor announced.
Forecasts of further steep interest rate hikes have led to lenders pulling a wide range of mortgage deals since the budget, with many fixed-rate deals pulled due to uncertainty regarding interest rates.