Bank of England mortgage approvals - August 2023

Mortgage approvals continue to fall and this will continue into next year until the central bank starts cutting rates. Conversely, people are really desperate with rates so high and are turning to riskier forms of credit to make ends meet, like credit cards and overdrafts. Pressure is building up in the credit system and defaults will start rearing their heads in earnest if rates stay too high for too long, which looks likely.

August is usually a slower month so I'm not reading too much into purchase data. There are still plenty of aspirational homeowners and movers out there, and they are waiting for the cost of borrowing to ease back to more workable levels. As mortgage costs are reducing, there will be an uptick in property sales again for the remainder of the year. For people remortgaging, we are seeing a significant increase in debt consolidation enquiries, with many people's finances at breaking point. The message to anyone looking to restructure debt is to do it sooner rather than later. Debt accruing to unmanageable levels can prevent the remortgage from happening at all, so don't wait. If you feel debt levels and personal solvency is a problem, act on your instinct. Don't stick your head in the sand.

While the purchase market has cooled overall, we have seen a good number of first-time buyers looking to buy. Falling property prices are helping drive this, along with the high rental costs in the South East, and even with higher mortgage rates, the monthly cost is similar, if not cheaper. The vast majority of our applications are still Product Transfers and remortgages and, with rates reducing, we are spending time grabbing cheaper deals for those who made early decisions to reserve. Let's see if the markets settle this side of Christmas, or if we see another bounce and increases.

Mortgage business for August was dreadful and September hasn't seen much of an improvement, despite the fact mortgage rates have been coming down. Many people are sitting on their hands and waiting amid the economic uncertainty and the result is a barren property market. I expect this trend to continue until we see further holds in the Bank of England base rate and, better still, for it to start coming down.

Transaction levels in August were typically down as they always are during the summer months. The expected increase in business that is normally seen in September though, is still enjoying the summer break as it's been a dreadful month for written business. Lots of enquiries but a real hesitation form people to commit. It's likely that until we see stability form the Bank of England, and lender rates reduced further, this decrease in activity is set to continue until early in 2024.