UK Mortgage Approvals Begin to Climb as the UK Property Market Shows Signs of Stabilising

UK Mortgage Approvals Begin to Climb as the UK Property Market Shows Signs of Stabilising

The UK mortgage market is showing signs of stabilising as mortgage approvals for house purchases have been on the rise in recent months. According to the Bank of England, mortgage approvals for house purchases in March 2023 reached 52,011, exceeding economists’ expectations of 46,250 approvals for the month. This suggests that the property market is recovering after the panic caused by the governments “mini” Budget in September, which led lenders to withdraw home loans. However, even with this increase in mortgage approvals, they are still 36% lower than they were in March 2021, when the stamp duty holiday extension created a surge in demand for mortgages.

The latest figures for mortgage approvals are in, and they paint an optimistic picture of the 2023 property market. The month of February 2023 closed with mortgage approvals for house purchases at 44,126 and economists expected this figure to be higher in March, forecasting a predicted 46,250 approvals for the month. March outperformed all predictions, and the month closed with an unexpectedly high number of mortgage approvals closing at 52,011.

As you can clearly see on the graph below (provided by that numbers of mortgage approvals have now entered a clear up-trend.

Valentina Romei, an Economics reporter at The Financial Times commented that:

“The jump in mortgage approvals suggests the property market is recovering after former prime minister’s Liz Truss’s “mini” Budget in September sparked panic that led lenders to withdraw home loans.”

So, there’s certainly positivity to be found in this month’s mortgage figures. However, at Prospect Tree Mortgages we are now eagerly awaiting figures for mortgage approvals for the month of April. Typically, the Bank of England publishes mortgage approval figures for the UK on the last Thursday of each month, which means that the figures for April 2023 may be published on Thursday 25h May 2023, unless there are any unforeseen delays.

Bank of England Base Rate

Even though mortgage approvals were up in the month of March, they still sit 36% lower than they were in March 2021. Of course, March 2021 is when the UK mortgage and house market experienced a surge in demand due to the extension of the stamp duty holiday, which was initially introduced in July 2020 to help support the housing market during the COVID-19 pandemic. The stamp duty holiday was originally due to end on 31st March 2021, but was extended by the government until the end of June 2021.

The extension led to a rush of buyers looking to complete their property purchases before the deadline, which in turn created a surge in demand for mortgages. As a result, mortgage approvals reached a record high in March 2021, according to data from the Bank of England.

This was further supported by the record low Bank of England Base Rate, which at the time was only 0.1%. Unfortunately for borrowers, the Bank of England has increased the Base Rate 11 times since then, and it currently sits at 4.25% which is the highest it has been since October 2008.

The Bank of England’s Monetary Policy Committee (MPC) will meet again on Thursday 11th May and are expected to further increase the Base Rate to 4.5%. Of course, this is not a guarantee and more a general consensus and we’ll have to wait until then to find out for sure.

UK House Prices are Rising

Nationwide Building Societies latest figures also showed a surprise rise in house prices during the month of April, whilst the annual rate of house price growth remains negative at -2.7%, it’s an improvement from March which was at -3.1%. Nationwide’s figures reported a 0.5% rise in house prices after seven consecutive falls. Robert Gardner, Nationwide’s Chief Economist commented that:

“While annual house price growth remained negative in April at -2.7%, there were tentative signs of a recovery with prices rising by 0.5% during the month (after taking account of seasonal effects). April’s monthly increase follows seven consecutive declines and leaves prices 4% below their August 2022 peak”.

First Time Buyers Serious About Buying May Want to Get Their Skates On

When house prices are rising the sentiment is a positive one and consumer confidence is high. The irony of this is that rising prices make it more difficult for First Time Buyers to enter the property market.

Especially at present whilst mortgage rates are higher, rising prices only compounds the problem and raises the bar for would be buyers.

Whilst impossible to accurately predict, there is a strong argument to suggest that there are no signs of any significant reductions to mortgage rates soon. So, if house prices continue to rise, and mortgage rates do not fall then it’s only going to become more difficult for First-time Buyers to enter step onto the property ladder in the short term.

Unfortunately, rates are higher right now, and a mortgage is going to cost you more than it would have done a few months ago, whether this will stop you from buying your first home soon is a decision only you can make.

Find Out What’s Possible for You

At Prospect Tree Mortgages, we’re big believers in making informed and educated decisions. So, we’d recommend anybody who is considering buying to get in touch with us for a free discovery call. This way you can make a sensible decision about what’s best for yourself and whether you should postpone buying your first home for a few years or roll up your sleeves and kick things off right away.

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