Mortgage approvals for residential property purchases have fallen to their lowest level since the end of 2023, raising fresh concerns about the outlook for property transactions.
The latest Bank of England figures show approvals dropped to 53,400 in September, down from 54,800 in August. It marks the third consecutive monthly decline.
Mortgage borrowing also weakened, with net lending falling to £3.9bn from £4.2bn the previous month.
The slowdown comes as buyers contend with rising mortgage costs, stubborn inflation and uncertainty over the direction of interest rates.
The effective interest rate on newly drawn mortgages increased to 4.63% in September, compared with 4.6% in August.
However, remortgage approvals rose sharply, climbing from 34,000 to 42,600.
Housing market faces further pressure
Lucian Cook, head of residential research at Savills, warned that the slowdown could continue into next year.
“Mortgage approvals fell to their lowest level since the end of 2023 in September and have remained below 60,000 for five consecutive months. This is a direct reflection of increases we have seen in fixed rate mortgage costs.
“This has brought a renewed sense caution to the housing market, with buyers having to rein in their budgets and aspirations to move.
“The market is likely to remain turgid until we see inflation brought under control and talk of interest rate rises return to talk of interest rate cuts. That points to continued modest downward pressure on prices in the short term and a relatively low transaction market next year.”
Iain McKenzie, CEO of The Guild of Property Professionals, said the figures underline the importance of realistic asking prices.
“For sellers, this makes accurate pricing more important than ever. Buyers have more properties to choose from, so homes that are priced in line with local market conditions are better placed to attract interest and secure a sale.
“Overpricing risks leaving properties sitting on the market while buyers focus on better-value alternatives.”
He added that buyers with realistic budgets could still find opportunities, particularly where sellers are motivated to agree a deal.
Did the Budget do enough?
The figures were published a day after the chancellor’s Budget, which introduced measures aimed at helping first-time buyers but offered little direct support for the wider housing market.
Jason Tebb, president of OnTheMarket, said the latest decline reflected continued uncertainty among buyers and sellers.
“Approvals for house purchases, a useful measure of market activity and sentiment as they indicate future borrowing, dipped once again in September, following falls in July and August.
“They remain below the previous six-month average as ongoing political and economic uncertainty impacts buyer and seller decision-making.”
Tebb was also critical of the Budget’s limited measures to stimulate transactions.
“Unfortunately, the Budget delivered very little of consequence to get the housing market moving.
“While the Your First Home scheme is welcome in that it will support first-time buyers purchasing new-build homes, there was little beyond this to encourage transactions and activity, which are so important to the smooth functioning of the market.”
Tomer Aboody, founding director of MT Finance, expressed similar concerns.
“A further decline in mortgage approvals reflects low confidence with the current government as the cost of living continues to rise and would-be homebuyers are being asked to pay more across the board.”
He welcomed the First Time Buyer ISA and Your First Home equity scheme but argued that the Budget offered little to improve wider market activity.
Buyers and sellers waiting for confidence to return
Jeremy Leaf, north London estate agent, said the figures reflected hesitation ahead of the Budget.
“Mortgage approvals are arguably the best barometer of future market activity. These figures demonstrate buyer intentions and were particularly interesting this time as they reflect the period of political and economic uncertainty leading up to the Budget.
“Not-too-much-of-a-difference is perhaps the best way of describing this data considering the number of buyers and sellers we have noticed in our offices who have been sitting on their hands in anticipation of yesterday’s announcements.”
Leaf expects some improvement in activity but warned that the delayed introduction of Your First Home could keep prospective buyers renting for longer.
Meanwhile, Simon Gammon, managing partner at Knight Frank Finance, said rising inflation and wholesale funding costs had prompted lenders to reprice mortgages.
“The low-key Budget was a positive, with government borrowing costs edging lower following the chancellor’s speech. This stability removes one important source of uncertainty for the housing market.”
However, he warned that elevated energy costs could continue putting pressure on inflation and mortgage rates.
Nathan Emerson, CEO of Propertymark, said the decline in borrowing was disappointing but understandable.
“Buyers are currently treading a cautious path in the face of what is a demanding housing market in many regions.”
He welcomed the increase in remortgage approvals and said greater housing supply would be essential to improving affordability.
