Mortgage approvals for house purchases fell to 54,900 in August, dropping below the average recorded over the previous six months, according to the latest Bank of England figures.
Approvals, which are an indicator of future borrowing, were down from a six-month average of about 60,100. Remortgage approvals also edged lower, falling to 34,000 from 34,600 in July.
However, the amount of mortgage debt borrowed by individuals increased during the month. Net mortgage borrowing rose from £4.1 billion in July to £4.4 billion in August, although this remained below the previous six-month average of £5.2 billion.
CONSUMER BORROWING CLIMBS
The figures also showed a rise in unsecured borrowing, with net consumer credit increasing from £2.1 billion in July to £2.5 billion in August. That compares with an average of £1.9 billion over the preceding six months.
Credit card borrowing accounted for £1.2 billion, up from £0.9 billion in July, while other forms of consumer credit, including personal loans and car finance, increased from £1.2 billion to £1.3 billion.
John Phillips, chief executive of Just Mortgages and Spicerhaart, said the August decline in mortgage approvals should be viewed in the context of the summer holiday period and wider pressures on the market.
He said: “Given it is prime holiday season, we shouldn’t be too surprised to see mortgage approvals dip in August – especially when you also consider the headwinds the market has been battling.
“While we did see some positive movements from lenders in August, rate volatility was rife as swap rates responded to the uncertainty caused by the ongoing conflict in the Middle East.
“Rates have only seemed to move in one direction since then, but despite this, we’ve been encouraged by a modest uplift in buyer registrations and valuation requests in September. It’s a good sign that there is still people out there looking to make moves and to buy.
“There’s no question that there’s some element of wait and see right now ahead of the Budget. The hope is that this gives way to some pent-up demand – particularly as we find out more about the new Your First Home scheme.
“Like we’ve seen with other headline products that have come to the market recently, it is likely to generate interest and enquiries, creating fresh opportunities for advisers to discuss the full range of options available to first-time buyers.
“As we head into the final quarter of the year, advisers need to be proactive and share the opportunities that still exist in the current market.”
AUTUMN DATA IN FOCUS
Tomer Aboody, founding director of specialist lender MT Finance, said: “With mortgage approvals down, reflecting low confidence in the current government, we are also seeing an increase in borrowing more generally as consumer bills are rising across the board.
“Any government which is aiming to grow the economy should consider lower taxes for the property market in order to stimulate growth and activity, which are far more important than what is happening with house prices.”
Richard Pike, sales and marketing director at Phoebus Software, said the fall in approvals suggested that some of the improvement seen during the summer had lost momentum.
He said: “A fall in mortgage approvals would suggest the tentative improvements seen over the summer has lost momentum.
“Affordability remains a significant constraint for buyers, while uncertainty around interest rates continues to make households cautious about taking on new borrowing.
“However, one month’s decline does not necessarily point to a wider slowdown. The market remains active, but buyers are clearly being selective about when they commit, with mortgage rates and household finances continue to influence purchasing decisions.
“The autumn figures will now be particularly important. If approvals continue to fall, it would point to a more sustained weakening in demand.
“If they stabilise and recover, this month’s decline may prove to have been another short-term fluctuation in an otherwise resilient market.”
