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Mortgage-backed property purchases set to ‘significantly decline’ - prediction

A lender is predicting mortgage-backed home purchases will be “significantly lower” in the coming months after borrowing has dropped since the swathe of interest rate rises by the Bank of England.

The cost of borrowing, or interest rates, were increased from 0.1% to 0.25% by the Bank of England’s Monetary Policy Committee in December 2021 and have since increase to 1.75%.

Industry analysis by specialist property lender Octane Capital has revealed that since the Bank of England began to increase interest rates in December of last year, the average number of homes purchased with the help of a mortgage has declined by 33%. 

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Octane Capital looked at the average monthly level of mortgage backed transactions between December of last year and the latest available data from March this year. 

It then compared this level of market activity to the four months prior.

The figures show that since the first of six consecutive base rate increases was implemented in December of last year, there have been an average of 37,019 homes purchased each month with the help of a mortgage. 

This is a 33% drop when compared to the monthly average of 55,070 per month purchased in the four months prior to this interest rate increase.

At a regional level, the North East has seen the largest reduction in mortgage market activity from homebuyers, with mortgage fuelled purchases down 39%, followed by the East Midlands, which is down 36%.

Jonathan Samuels, chief executive of Octane Capital, said: “Following the Bank of England’s decision to first increase interest rates in December of last year, there was an almost immediate retraction in market activity coming via the mortgage sector. 

“This was to be expected given the fact that it was the first base rate increase since November 2017 and particularly given the backdrop of wider economic uncertainty and the cost of living crisis. 

“We now know that this was just the tip of the iceberg with respect to increasing interest rates and this latest insight into declining mortgage sales volumes doesn’t yet account for the base rate hikes seen in May, June or August. 

“So we expect the decline in market activity coming from mortgage backed homebuyers to be significantly lower still when these figures are finally released.”

Table shows the change in the average number of montly mortgage transactions since the first interest rates increase in December 2021 versus the same time period prior to this increase
    Location Mort sales vol average per month - Aug 2021 to Nov 2021 (previous four months) Mort sales vol average per month - Dec 2021 to Mar 2022 (latest available) Change %
    North East 2,322 1,414 -39.1%
    East Midlands 4,304 2,766 -35.7%
    Yorkshire and The Humber 4,798 3,102 -35.4%
    North West 6,365 4,118 -35.3%
    West Midlands Region 4,661 3,038 -34.8%
    South West 4,841 3,165 -34.6%
    East of England 5,452 3,579 -34.4%
    South East 8,080 5,311 -34.3%
    Wales 2,573 1,782 -30.7%
    London 5,065 3,592 -29.1%
    Scotland 6,609 5,153 -22.0%
    England 45,888 30,083 -34.4%
    Great Britain 55,070 37,019 -32.8%
           
    Table shows the areas to have seen the largest decline in the average monthly number of mortgage transactions since the first interest rates increase in December 2021
    Location Mort sales vol average per month - Aug 2021 to Nov 2021 (previous four months) Mort sales vol average per month - Dec 2021 to Mar 2022 (latest available) Change %
    Gosport 87 44 -49.9%
    Teignbridge 134 69 -49.0%
    Newark and Sherwood 124 64 -48.9%
    Tewkesbury 94 48 -48.8%
    Runnymede 90 48 -47.4%
    North Norfolk 69 37 -47.1%
    South Holland 92 49 -47.0%
    Allerdale 86 46 -46.5%
    Bolsover 85 45 -46.4%
    City of Peterborough 198 106 -46.4%
           
    Table shows the areas to have seen the smallest decline in the average monthly number of mortgage transactions since the first interest rates increase in December 2021
    Location Mort sales vol average per month - Aug 2021 to Nov 2021 (previous four months) Mort sales vol average per month - Dec 2021 to Mar 2022 (latest available) Change %
    Clackmannanshire 56 55 -2.2%
    South Ayrshire 107 95 -11.3%
    Inverclyde 72 62 -12.9%
    Merthyr Tydfil 48 40 -15.3%
    Hackney 100 85 -15.3%
    East Ayrshire 129 109 -15.3%
    Stirling 101 86 -15.3%
    Ceredigion 42 35 -15.7%
    West Lothian 231 194 -16.1%
    North Lanarkshire 384 321 -16.3%
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