UK mortgage approvals fell to their lowest since the financial crisis housing crash, when excluding the pandemic, as soaring interest rates and the cost-of-living squeeze cooled activity.
(Bloomberg) — UK mortgage approvals fell to their lowest since the financial crisis housing crash, when excluding the pandemic, as soaring interest rates and the cost-of-living squeeze cooled activity.
Lenders approved 39,637 home loans in January, 2.2% fewer than in the previous month, the Bank of England said Wednesday. That’s the lowest level since early 2009 except the UK’s first Covid lockdown when the property market was closed.
The figures come shortly after Nationwide Building Society reported a sixth consecutive monthly decline in house prices, with the average value of a home now lower than it was a year earlier.
Homebuyers and those remortgaging are facing a big squeeze from higher mortgage repayments after political turmoil and BOE rate rises pushed up costs. The effective rate on new mortgages rose 21 basis points to 3.88% in January, a jump from 1.58% a year earlier, the BOE said.
Separate figures showed consumers borrowed an extra £1.6 billion (£1.9 billion) of unsecured credit during the month, the most since last summer and double the amount economists forecast. It adds to evidence that households are holding up better than expected amid signs that double-digit inflation has peaked and job losses will be limited.
UK House Prices Slide at Sharpest Annual Pace Since 2012
That will be welcomed by estate agents, who are pinning their hopes on an easing of the pressure on family budgets.
“The UK housing market is suffering a prolonged hangover from the mini-Budget and the mortgage market turmoil that marked the final quarter of 2022,” said Tom Bill, head of UK residential research at Knight Frank. “House prices are 20% higher than they were before the pandemic and we expect around half of this to unwind over the next two years as buyers revise down their budgets.”
Unsecured lending in January was driven by a £1.1 billion jump in credit-card debt. That chimes with a pickup in retail sales during the month, when post-Christmas discounting brought people into stores.
Over the past year, credit-card borrowing has soared 13.5%, the fastest pace since 2005. However, some of that increase may reflect distressed households taking on debt to help them pay the bills.
Households deposited an additional £3.5 billion with banks and building societies in January. This was driven by a net flow of £6.9 billion into time deposits, but partly offset by net withdrawals in sight deposits.
Non-financial businesses withdrew £20.3 billion of deposits in all currencies, the most in records going back to 2009. On balance, they repaid £3.5 billion of bank loans during the month.
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