Net borrowing of mortgage debt by individuals amounted to £6.1bn in September 2022, according to the latest Bank of England figures.

The total matched the previous month’s figure and is above the past six-month average of £5.7bn.

However, mortgage approvals for house purchases decreased significantly to 66,800 from August’s figure of 74,400, and were below the past six-month average of 67,200. Approvals for remortgaging – which only capture deals with a different lender – were also down: 49,100 from August’s 49,500. However, the figure was still above the past six-month average of 47,100.

The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages was 2.84% in September, up 29 basis points from the previous month. This represented the largest monthly increase since December 2021 when the Bank Rate started to rise. The rate on outstanding mortgages increased by seven basis points to 2.24%.

Industry reaction suggested the figures were largely consistent with expectations.

“A dip in mortgage approvals was very much on the cards, particularly given the turbulence that rocked the sector towards the end of the September as a consequence of the government’s disastrous mini-budget,” said Jonathan Samuels, CEO of Octane Capital.

“However, while it’s fair to say that the market has shifted down a gear or two, September’s level of mortgage approvals doesn’t sit far off the average level seen over the last 12 months. In fact, when you look at historic levels for this time of year prior to the pandemic property market boom, the latest sum actually sits marginally higher than the levels seen in September 2019, 2018 and 2017.

“So while today’s decline will no doubt sow further seeds of panic that a market collapse is on the horizon, what we’re currently seeing at present is very much a return to normality,” Samuels added.

Steve Seal, CEO of Bluestone Mortgages, commented:  “With inflation hitting a 40-year high this month, it’s unsurprising we’ve seen a dip in mortgage approvals. And, with last month’s mini-budget triggering extreme swap rate volatility, we’ve seen lenders withdraw products from the market, which will undoubtedly make the homeownership dream harder.”

Marc von Grundherr, director of Benham and Reeves, said the latest decline in approvals would have been “exaggerated to a degree, due to the knee-jerk response by the mortgage sector to reduce the level of products available following the government’s shambolic mini-budget”.

He added: “While we’ve now seen a degree of stability return to the market in this respect, it’s also important to note that we’re coming off the back of what is traditionally one of the busiest periods of the year for the UK property market.

“Therefore, it’s only to be expected that the level of buyers entering the market will start to cool gradually as we approach the end of the year.”

Chris Hodgkinson, managing director of House Buyer Bureau, commented that the drop in mortgage approvals was “a significant one” that highlighted the reduction in buyer demand seen across the current market.

“For the nation’s sellers, this means less potential buyers fighting it out for their property, with the inevitable consequence being that they simply won’t achieve the same price as they may have six months or more ago,” he said.

“Despite some stability returning for buyers with a slight reduction to mortgage rates, this downward trend looks set to remain.”

Jason Tebb, CEO of OnTheMarket, agreed the drop in approvals was significant.

Tebb said his company’s figures showed sentiment remained “robust” in September as 53% of properties were sold subject to contract within 30 days of being advertised for sale, but added: “Buyers have less buying power as interest rates and the cost of living continue to rise.

“People move for a variety of reasons and will continue to do so, even in more challenging markets, but new properties coming to market must be priced realistically or are likely to struggle to sell and stick on the market.”