Mortgage Approvals Dip Slightly as Borrowers Take on More Debt

As the UK housing market continues to navigate uncertain times, new figures from the Bank of England reveal that mortgage approvals dipped slightly last month. Despite this, borrowers are still taking on more debt to get on the housing ladder, with net mortgage borrowing increasing to £2.4 billion in April.

UK mortgage approvals graph

According to the data, there were 61,100 mortgage approvals for house purchases in April, a slight drop from the 61,300 recorded in March. This came as mortgage rates edged slightly higher in April, with some lenders pushing back expectations for when the Bank of England will next reduce interest rates from their current rate of 5.25%.

Approvals for remortgaging also decreased to 29,000 for the month, from 33,500 in March. However, this decrease was offset by an increase in net mortgage borrowing, which rose to £2.4 billion in April from £0.5 billion in March.

Mortgage rates graph

“Mortgage approvals for new purchases were fairly consistent with the previous month, perhaps reflecting mortgage rates edging upwards, which may have raised borrower concerns with regards to affordability and confidence,” said Mark Harris, chief executive of mortgage broker SPF Private Clients.

The data also found that households’ holding of money increased by £8.4 billion in April, with households depositing £11.7 billion into ISAs, the highest amount since records began in 1999.

ISA savings

As the UK economy continues to navigate challenging times, it remains to be seen how the housing market will respond in the coming months. One thing is certain, however: borrowers are still eager to take on debt to get on the housing ladder, despite the uncertain economic outlook.

The State of the UK Housing Market

The UK housing market has been subject to various challenges in recent years, from Brexit uncertainty to the COVID-19 pandemic. Despite these challenges, the market has shown remarkable resilience, with house prices continuing to rise in many parts of the country.

However, the latest data from the Bank of England suggests that the market may be starting to slow down. Mortgage approvals, a key indicator of housing market activity, dipped slightly in April, while remortgaging approvals also decreased.

Housing market graph

So, what’s driving this slowdown? One possible explanation is the recent increase in mortgage rates. With the Bank of England raising interest rates to 5.25% in March, lenders have responded by increasing their mortgage rates, making borrowing more expensive for homebuyers.

Another factor that may be contributing to the slowdown is affordability. With house prices continuing to rise, many would-be buyers are finding it increasingly difficult to afford a home. This, combined with stricter lending criteria, may be deterring some buyers from entering the market.

What’s Next for the UK Housing Market?

So, what’s next for the UK housing market? Will the slowdown in mortgage approvals signal a broader decline in the market, or is this just a minor blip?

Only time will tell, but one thing is certain: the UK housing market remains a complex and dynamic beast, subject to a wide range of influences and uncertainties.

As the Bank of England continues to navigate the challenges of monetary policy, and the UK economy responds to the ongoing impact of Brexit and the COVID-19 pandemic, the housing market will likely remain a key area of focus for policymakers and market watchers alike.

Housing market forecast

In the meantime, borrowers and lenders alike will be keeping a close eye on the market, waiting to see how the latest trends and developments will play out in the coming months.