The Bank of England has published its Money and Credit report for October 2022.

It found that net borrowing of mortgage debt by individuals decreased from £5.9 billion to £4.0 billion last month.

Gross lending increased to £28.2 billion in October from £27.2 billion in September, while gross repayments went up from £21.5 billion to £24.8 billion.

Approvals for house purchases, an indicator of future borrowing, decreased to 59,000 in October, from 66,000 in September, and were below the previous 6-month average (also 66,000). Approvals for remortgaging (which only capture remortgaging with a different lender) increased slightly in October, to 51,300 from 49,500 in September, and were higher than the previous 6-month average of 47,300.

Meanwhile, the ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 25 basis points, to 3.09% in October.

Steve Seal, CEO of Bluestone Mortgages, said: “The aftermath of the mini-budget continues to take its toll, with a further drop-off in lending activity. While lenders are re-entering the mortgage market after extreme swap rate volatility, there are still strong headwinds lying ahead, which will undoubtedly have an enormous impact on the homeownership dream.

“For those worried about the current lending environment and how it will impact their ability to get onto the housing ladder, now is the time to pick up the phone and speak with a mortgage broker. These professionals are best placed to support existing and would-be borrowers, as well as signpost them to the options available. It’s the duty of our industry and at the core of what we do to remind people that the homeownership dream is still within reach.”

Karen Noye, mortgage spokesperson at Quilter, added: “This morning’s Money and Credit statistics from the Bank of England once again show signs of a housing market on the brink of a significant dip, if not a crash. The latest figures reveal that mortgage approvals for house purchases fell to 59,000 in October, down from 66,000 in September.

“This latest fall suggests demand is beginning to come out of the market, and this may come at a time where more people are starting to consider putting their properties up for sale as a result of unaffordable mortgage and heating costs. As we move further into the winter and the temperature drops, increased energy bills alongside greatly increased mortgage payments may result in more and more people being unable to afford to stay in their current homes. If this is the case – and the level of demand continues to decrease – we will likely see a subsequent reduction in house prices and a switch from the seller’s market seen in recent years to a buyer’s market.

“The Bank of England’s base rate now sits at 3%, the highest rate seen for over three decades, and further rate rises are widely expected as inflation continues to grow. This jump in interest rates means those looking to remortgage or take their first step onto the property ladder will suffer considerably higher monthly costs than they would have done just a couple of months earlier. If rates continue to rise and push buying a first home out of reach for many, then demand in the housing market will likely see an even further dip as people hold off on buying in the current climate.

“The cost-of-living crisis is also putting significant stress on people’s finances outside of the housing market, illustrated by this morning’s data which shows an increase in the level of borrowing taking place. Individuals borrowed an additional £0.8 billion in consumer credit in October, up from September’s £0.6 billion. While this number remains well below August’s £1.2 billion, the uptick hints at a renewed reliance on credit as energy bills and other everyday costs continue to rise.

“Should borrowing continue to rise and more people start to load debt onto credit cards to help make ends meet, it could prove disastrous. The effective rate on interest bearing credit cards rose to 19.31% in October, up from 18.96% in September, meaning borrowers could rapidly find themselves spiralling into debt.”