In what seems a promising turn of events, the UK housing market is experiencing a sense of revitalisation as mortgage approvals are finally on the rise again, after months of decline. The recent market uncertainty and economic challenges have put homeowners and prospective homeowners under a lot of strain but now it seems a collective sigh of relief is in order.
This surge in mortgage approvals can surely only mean positive economic growth and opportunities but, as always, there is much more lurking behind this positive picture. Let’s investigate what this means for the UK housing market and specifically how it affects you.
A Brief History of UK Mortgage Approvals in Recent Years.
We have seen a steady decline in mortgage approvals in the UK since July 2021. We saw a dip in numbers from just over 76,000 to just under 64,000 in June 2022, which is below the 12-month pre-pandemic average of 66,700 in February 2020.
With the easing of lockdown restrictions, the housing market began its recovery, with a rapid increase in the number of mortgage approvals to over 100,000 in November and December 2020. However, since then, 750,000 households have been forced into poverty due to climbing interest rates on mortgage repayments, and wages have increased 4% slower than the rate of inflation. Due to this, banks and building societies approved fewer mortgages than ever before.
This decline was affected by several elements, one being the rapidly increasing base rate (at 4.5% in May 2023) and the challenge homeowners faced getting onto the property ladder because of this. This means that successful mortgage approvals dropped rapidly between January 2022 and January 2023.
Are Mortgage Approvals Finally on the Rise Again?
As of December 2023, Bank of England data shows mortgage approvals have hit a 4-month high with 47,383 mortgage approvals for October, which is 8% higher monthly, but 17% lower annually. This undoubtedly means that some confidence is returning to the mortgage market as rates have continued to drop and buyers have been able to adjust their budgets.
Frances McDonald, director of research at Savills stated: “Next year transactions are forecast to improve to 1,040,000, once we see a more meaningful decrease in mortgage rates, before increasing to 1,160,000 by 2026 as mortgaged buyers begin to take a greater share of the market again.”
What Does This Mean for UK Mortgages?
These subtle signs suggest we may slowly be emerging from the worst of it; however, it is not clear whether we are completely out of the woods yet. It hints at a resilient number of buyers who are gradually adapting to the new normal of higher interest rates and an uncertain economic landscape, even though gross lending has declined, suggesting that these higher interest rates have put potential buyers off obtaining new mortgages.
It is important to proceed with caution, as these turn events suggest a delicate balancing act. The demand for housing driven by limited stock and rising rental costs, is nudging potential buyers towards purchasing despite the high costs, whilst on the other hand, expensive mortgages and economic uncertainty are leading many to adopt a wait-and-see approach. Both of which are keeping the market in a state of flux.
Need Advice on How this Affects You? Speak to a Specialist Mortgage Advisor in Manchester.
While the notion of mortgage approvals rising is initially a positive step, there are still many factors in the mix. Your circumstances play a huge role in the acceptance of a mortgage, so this is something that needs a lot of time and attention from you before entering a mortgage proposal. This is where TaylorMade can help. We are an independent mortgage broker in Manchester, with years of experience helping first-time buyers, those wanting to remortgage, and those with bad credit scores.
We are equipped with the knowledge and know-how to help you navigate the current mortgage landscape, to ensure you get the best deal on the market for you. We are the leading mortgage advisor in Manchester, committed to helping you find the answers to your mortgage struggles.
If you would like to chat with one of our professionals at our specialist mortgage brokers in Manchester, contact TaylorMade today, to see how we can help you.
