Mortgage approvals rise but buyers remain cautious

The number of mortgage approvals edged up for a second month in a row during June but remains below 2022’s monthly average.

Data from the Bank of England shows mortgage approvals for home purchases rose 6.9% on a monthly basis to 54,622.

But the figure is down 13.5% annually and 15% below the average number of approvals for last year.

It comes as mortgage pricing has been rising in recent years, raising fears of a housing market slowdown as buyers wait for affordability to improve.

Chris Druce, senior research analyst at Knight Frank, said: “Activity within the UK property market has taken a hit due to the cost of borrowing being at its highest since 2008.

“The mortgage approval data for house purchases shows a second consecutive monthly rise in June, and the best performance since October. However, approvals, a leading indicator of demand, remain 15% lower than 2022’s monthly average.

“Growing expectations that we may be nearing the peak for interest rates as inflation slows will help to settle buyers’ frayed nerves and support activity, but the affordability challenge will remain. Despite this month’s increase it’s unlikely we’ll see a dramatic turnaround in activity this year.

“However, strong wage growth and high employment, along with forbearance from lenders and the availability of longer fixed-rate mortgage terms, is the reason that the market has regained its footing.

“It means that the UK property market will avoid a cliff-edge moment, however we do we expect house prices to fall by 10% during the remainder of this year and next.”

Jason Tebb, chief executive of OnTheMarket, added: “As approvals for house purchases, an indicator of future borrowing, edge upwards in June, there is continued caution among buyers in light of consecutive interest rate rises and the high cost of living.

“While inflation is moving in the right direction, further rate rises can’t be ruled out, making affordability even more of an issue for buyers relying on mortgages.

“Nevertheless, those who are committed to moving are getting on with it regardless, with HMRC reporting recent transaction numbers rising in June compared with May and our own data suggesting sentiment remains remarkably stable. Buyers are price-sensitive, so it is essential sellers come to the market at the right level in order to speed up the time it takes to sell.”