Mortgage approvals drop in April

2nd June 2023

Figures from the Bank of England (BoE) show this was down from the 51,500 approvals in March and indicates the market is again declining after two months of slim growth. However the number of approvals for remortgaging increased slightly, from 32,200 to 32,500 during the same period.

Overall the value of this net mortgage debt has reached the lowest level on record, if the period the following the onset of the pandemic is excluded. The figures show the borrowing of mortgage debt by individual declined from net zero in March to £1.4 billion of net repayments in April. This is the lowest level on record, if the period since the onset of the Covid-19 pandemic is excluded. If the period since the onset of the Covid-19 pandemic is excluded, net borrowing of mortgage debt was at its lowest level on record (series beginning in April 1993)

Separately figures from BoE showed that borrowing of consumer credit by individuals in April remained broadly unchanged when compared to March, at £1.6 billion. The additional consumer credit borrowing in April was split between £0.7 billion of borrowing on credit cards and £0.9 billion of borrowing through other forms of consumer credit (such as car dealership finance and personal loans).

Commenting on the figures, Paul Heywood, Chief Data & Analytics Officer at Equifax said “Today’s Bank of England figures reveal that consumer appetite for borrowing has begun to slow against a backdrop of higher interest rates and squeezed incomes.”

“Last month’s figures showed the beginning of a sharp increase in withdrawals from savings accounts, a trend which slowed in April as households increasingly took advantage of high saving rates. There are signs that inflation is slowing, but price increases will cast a shadow on consumer and business finances over the summer.”

“Mortgage approvals appear to have been impacted by the Bank’s inflation-tackling efforts. There will be many consumers whose mortgages are due for renewal that will be facing a ‘mortgage shock’ before the end of the year. Equifax and our lending partners will continue to work closely to support customers who may experience such shocks and enable them to live their financial best.”

“In spite of these storm clouds, with summer on the horizon, there are signs of brighter days ahead. The latest Equifax data suggests that consumers are well-positioned to continue to take steps to ensure that they can meet current economic demands, undertaking effective cost-cutting and cost-mitigating measures and avoiding unmanageable debt.” 

Joanna Elson CBE, Chief Executive of the Money Advice Trust said “Consumer credit borrowing continues to grow significantly, which partly reflects the impact that sustained high costs are having on household finances.  With many incomes struggling to cope, there is a risk that more people are left using credit to plug gaps in their budgets.”

“A third of surveyed callers to our National Debtline service say they have already had to use credit to cover essential costs, including for energy and council tax bills.  As ever, it’s those on the lowest incomes who face the hardest choices and are most at risk of difficulty as debts can quickly build up.”

“I would encourage anyone worried about their finances to contact a free debt advice service as soon as possible.”

Andrew Fisher, Chief Growth Officer at Freedom Finance said “Improving consumer confidence drove further high levels of borrowing in April despite persistently high prices of food and energy continuing to squeeze household budgets.”

“We have been witnessing increasing demand for credit with a 50% increase in visitors to our platform looking for loans compared to the same point last year. We are now starting to see a demographic change in those looking for credit as more wealthier customers with higher average salaries look for products as the hunt to consolidate household debt trends up.”

“Sticky inflation means that the cost of borrowing is likely to remain at the current elevated levels with average quoted rates on credit cards at their highest level since 1997. It emphasises the importance of shopping around and consumers using all the technology at their disposal like soft searches to protect their credit rating and filter out the products they are not eligible for.”

Simon Webb, Managing Director of capital markets and finance at LiveMore, said “The Bank of England’s money and credit data shows net borrowing of mortgage debt in April at its lowest level in 30 years, which is when the data series started (excluding the Covid lockdown period).”

“This is the eighth consecutive fall in mortgage lending and a result of higher mortgage rates and people’s finances squeezed due to the high cost of living.”

“Net house purchase approvals rose in February and March but have fallen slightly in April by 2,800, which could be a reflection of a shorter month due to the Easter holidays.”