September’s Mortgage Approval Rates Soar by 3%

property investment

The latest figures released by the Bank of England show that mortgage approval rates had reached a three-month high of 62,932 in September 2023. The figure is about 3% higher than it was in August, and overtakes Reuters average forecast of 60,150 (1) by a significant margin. In addition, consumer credit has increased by £1.4 billion in the month. In August 2023, mortgage approval rates dropped to 60,984- the lowest they had been in years. (2)

The figures suggest that the UK property market is starting to recover after a slowdown triggered by the EU referendum.

In the larger scheme of things, however, there has been an overall decrease in buy-to-let home purchases in the UK compared the previous year. In addition, re-mortgage rates are still low in comparison to previous months. For example, recent figures show that “the volume of remortgages dropped by 12% from 34,900 in August to 30,766 in September, while the value of gross remortgage lending also decreased, dropping by 14% from £5.9bn in August to £5.1bn in September.” (3)

Scott Bowman from Capital Economics noted, “August’s UK money and credit figures suggest that the housing market continues to cool, but appetite for debt hasn’t taken much of a hit.” (4) According to the Guardian, the latest monthly report from RICS showed that “for the first time since April, surveyors expect house prices to increase over the next three months.” (4)

It could be argued that the spike in mortgage approvals were influenced by the Bank of England’s decision to reduce the rates from 0.5 to 0.25 percent back in August 2023 (5), which provided opportunistic investors a window amidst Brexit uncertainty. The simplicity of this direct cause and effect, however, is negated by Martin Beck, a senior economic adviser to the EY Item Club. Beck said, “Stripping out the extent to which this is a consequence of post-EU referendum uncertainty, as opposed to other factors, including tax rises on buy-to-let properties earlier this year and ever more expensive housing, is problematic.” (4)

Critics assume that the fundamentals for consumers will become less appealing, “with purchasing power likely diminishing and the labour market softening.” (4) This could either increase caution around borrowing, or increase the need for individuals to borrow. However, considering the unpredictability of today’s economic and political state, it’s almost impossible to tell.

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