Mortgage approvals drop by 10%

31st August 2023

The number of mortgage approvals made to home buyers fell by nearly 10% between June and July, according to Bank of England figures.

The figures showed that net mortgage approvals decreased from 54,600 in June to 49,400 in July, while approvals for remortgaging slightly increased from 39,100 to 39,300 during the same period. Net borrowing of mortgage debt by individuals increased for the third consecutive month to £0.2 billion in July, from £0.1 billion in June.

The figures also showed that consumer borrowing also declined. Net borrowing of consumer credit by individuals fell to £1.2 billion in July, down from £1.6 billion in the previous month.

Commenting on the figures Paul Heywood, Chief Data & Analytics Officer at Equifax said “Today’s Bank of England figures have revealed that consumer borrowing fell by a quarter in July. This fall in borrowing has come as mortgage rates have continued to fluctuate in the face of a further increase to the base rate in September – a sign that inflationary pressures and uncertainty will last into autumn.”

“For many consumers, housing costs will likely continue to top their list of money worries, as rate rises push the number of mortgages with a monthly repayment above £1,000 up by 28% year-on-year according to the latest Equifax figures. These increasing costs combined with sky-high costs for everyday goods will mean wallets remain squeezed for the foreseeable future.”

“For those consumers who are renting, it will take some time before we see the full extent of these rate rises on the rental market. There are certainly challenges ahead for homeowners, renters, borrowers, and lenders; however, Equifax and the credit sector continue to be on hand to provide the support they need to live their financial bests.”

Richard Lane, Director of External Affairs at StepChange Debt Charity, said “Today’s Money and Credit figures from the Bank of England reveal the rate of interest on new mortgages rose by 3 basis points in July. This comes on top of significant rises already and will not only cause further pain for homeowners, but also private renters as landlords could pass on higher costs to tenants. Recent ONS figures showed the average price of rent across England had reached its highest level since records began, with renters paying larger and larger proportions of their income toward housing costs. Without targeted support, many will be vulnerable to the risk of problem debt as they struggle to keep up with other financial commitments on top of rising rents. Meanwhile, new StepChange client data confirms that the number of people in need of debt advice continues to climb – client volumes were 8% higher year-on-year in July.”

“This winter we’ll see the pressure on households ramp up as energy bills rise in the colder months, while food inflation remains stubbornly high. It’s important that government is ready to step in with further interventions to support low income households, while lenders and regulators must proactively identify and support customers in difficulty, and not cause further hardship by seeking unaffordable debt repayments.”