UK Economy: Mortgage approvals surge as homebuyers struggle to obtain credit amid market headwind warnings

Mortgage approvals have skyrocketed as homebuyers seek to secure credit ahead of further rate hikes, the latest figures show.

The raise comes amid warnings of mounting “headwinds” facing the already slowing housing market amid rising inflation and rising inflation economic turmoil triggered by the chancellor’s mini budget.

Kwasi Kwartengs credit-financed tax cut plans have the prospect of the Bank of England Responding even more aggressively to interest rates, leading to higher mortgage costs.

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In response to the uncertainty, many mortgage products were drawn from lenders.

The industry has also said that the stamp duty cuts unveiled as part of the package to boost home sales “have since been wiped out by the tsunami of market volatility.”

Around 74,300 mortgage approvals were registered in August, up 16% from 63,700 the previous month, according to the Bank of England’s Money and Credit Report.

This is the highest level since 74,500 registrations in January and follows a decline in previous months.

Samuel Tombs, UK chief economist at Pantheon Macroeconomics, said: “The sudden surge in mortgage approvals for home purchases in August to their highest level since January likely reflects people’s attempt to secure credit ahead of the expected rise in mortgage rates, rather than up call for a fundamental increase in mortgage rates.”

Almas Uddin, Founding Director of Revolution Brokers, said: “Mortgage approvals have continued to soar in recent months, even as mortgage rates have risen in line with numerous interest rate hikes by the Bank of England.

“This was spurred by a sense of urgency from the country’s homebuyers, who want to continue locking in fairly reasonable interest rates in anticipation of further hikes this year.”

Meanwhile, the Nationwide Building Society reported that month-to-month home price growth stalled in September, but annualized home values ​​were still 9.5% higher than a year earlier.

Real estate agents said there could be some renegotiation on a backdrop of rising interest rates – and if that becomes a trend, it could affect house prices.

Across the UK, the average house price in September was £272,259, Nationwide said.

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Robert Gardner, Nationwide’s chief economist, said: “In September, annual house price growth slowed to single digits for the first time since last October, although the pace of growth remained resilient at 9.5%.”

He added: “By lowering transaction costs, the stamp duty cut may provide some support to activity and prices, as well as labor market strength if sustained, with the unemployment rate at its lowest level since the early 1970s.

“However, the headwinds are increasing, suggesting that the market will continue to slow down in the coming months.

“High inflation is putting significant pressure on household budgets and consumer confidence is falling to historic lows.”

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Andrew Montlake, chief executive of mortgage broker Coreco, said: “The days of double-digit growth may not be returning for a long time.

“The level of uncertainty in the markets and what consumers are feeling is off the charts.

“The brief boost in sentiment caused by Friday’s stamp duty announcement has since been wiped out by the tsunami of market volatility.”