Mortgage Approvals Drop to Five Year Low
The number of mortgages that banks lent out to customers fell to its lowest point in five years during December 2017, according to the banking lobby group UK finance.
According to the figures there were 36,115 mortgage approvals in December which is the lowest since April 2013. During the month, banks approved £7.02bn in mortgages which the lowest amount in terms of cash value since September 2016.
The number of approvals dropped from 39,007 in November and is 19% lower than it was during December of the previous year. The slump in approvals happened despite the government’s decision to reduce stamp duty for first-time home buyers, although many industry analysts agree it happened too recently to have an impact.
One factor could be the Bank of England’s (BoE) decision to increase base rates to 0.5% in November which led to a rise in variable rate mortgages in December.
Figures from UK finance did show an increase in first time buyers during December which may have been assisted by various ongoing government schemes. This increase was not felt across the board however, with a recent study undertaken by the Royal Institution of Chartered Surveyors showing that 86% of surveyors had not seen an increase in enquires from buyers since the stamp duty cut.
"December's marked drop in mortgage approvals suggests that already pressurised housing market activity took a further hit from the Bank of England raising interest rates in early November," said Dr Howard Archer, chief economic adviser to the EY Item Club.
"Housing market activity has been under pressure from squeezed consumer finances and fragile confidence."
This news has coincided with the English Housing Survey releasing its annual report on the housing market. These figures showed that the amount of people renting properties had also hit an all-time high of 30% which was up from 28.1% for the previous year.
Lucian Cook, an analyst at Savills, said: "These figures demonstrate how London is at the sharp end of the housing crisis, with severely restricted access to home ownership putting increasing pressure on the private rented sector."
The number of homes that are privately rented has risen a staggering 74% in the past decade and each household typically spends 41% on rent. Mortgaged households on the other hand are spending much less on housing costs and average at around 19%.