UK mortgage approvals for October fall 10% after mini-budget

Homebuyers face higher interest costs, as lending figures slump to lowest monthly total since June 2020

The chaos in the mortgage market that followed Kwasi Kwarteng’s now infamous mini-budget led to a 10% fall in the number of mortgage approvals during October.

According to the latest figures from the Bank of England, the number of mortgages approved by lenders slumped from 66,000 in September to 59,000 last month – the lowest monthly total for mortgage approvals since June 2020.

The figures cover the period immediately after Kwarteng delivered the 23 September mini-budget that sent the markets into turmoil, forcing the Bank of England to start buying long-dated UK government bonds, in an attempt to stabilise the market.

More than 40% of the mortgage market disappeared almost overnight, leaving many homebuyers without a firm loan offer no longer able to afford the home they had intended to buy, and forcing them to pull out.

Calm was restored by the reversal of most of the mini-budget, but homebuyers are still facing much higher interest costs.

The interest rate on new mortgages jumped by 0.25% to 3.09% in October while net borrowing of mortgage debt by individuals decreased from £5.9bn to £4.0bn in October, the bank said.

Simon Gammon, a managing partner at Knight Frank Finance, said this lending data shows activity “slowing markedly”.

“Monthly mortgage approvals for the purchase of homes are running below long-run averages, which may be a sign of things to come. The mini-budget weighed heavily on sentiment and it’s now clear many buyers have opted to postpone acting at least until the other side of Christmas,” he said.

On Monday the property website Zoopla reported demand had weakened, prompting homeowners to accept offers below the asking price. The company is predicting house prices will fall by about 5% next year.

New sales have dropped by up to 50% in previous hotspots and areas where higher mortgage rates will hit buying power hardest – in southern England, the east Midlands and Wales, it said.

Zoopla expects mortgage rates to fall to about 5% at the turn of the year, from about 6% now for two-year and five-year fixed deals.

The Bank of England data also reveals October saw a boom in savers pushing their money into fixed-rate savings products.

Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, said: “There was a fixed rate savings frenzy in October, as £11.3bn piled into these accounts – a record high. This was more than eight times as much as went into fixed-rate savings in September, and reflects a growing sense that we may be getting near the top of the fixed-rate savings market. This may be almost as good as it gets for fixed rates,” she said.

Contributor

Miles Brignall

The GuardianTramp

Related Content

Article image
OBR forecasts likely to show £60bn-£70bn hole after Kwarteng’s mini-budget
Predictions handed to chancellor expected to paint gloomy picture for UK economy amid sweeping tax cuts

Richard Partington Economics correspondent

07, Oct, 2022 @5:20 PM

Article image
Kwarteng considers extending mortgage guarantee scheme
Initiative may continue beyond December as bank bosses raise concerns over mortgage market

Kalyeena Makortoff and Rupert Jones

06, Oct, 2022 @4:15 PM

Article image
More than 40% of mortgages withdrawn as market reels after mini-budget
Lenders began pulling products on Monday as they struggled to price products amid financial uncertainty

Phillip Inman

29, Sep, 2022 @1:23 PM

Article image
UK house prices fall for fifth month in a row
Average cost of home now 3.2% below August 2022 peak as mortgage demand slumps

Joanna Partridge

01, Feb, 2023 @8:21 AM

Article image
UK house prices fall at fastest pace since 2020 amid fallout from mini-budget
Nationwide warns inflation and rising interest rates will weigh down housing market

Kalyeena Makortoff Banking correspondent

01, Dec, 2022 @8:44 AM

Article image
Mortgage approvals fall as Brexit vote appears to subdue housing market
Bank of England says approvals in August were at lowest level since November 2014, but unsecured borrowing continues to rise

Katie Allen

29, Sep, 2016 @11:08 AM

Article image
UK house prices flatlining as mortgage rates rise, says Nationwide
Lender says slowdown will intensify in coming months as household budgets come under more pressure

Mark Sweney

30, Sep, 2022 @10:41 AM

Article image
Mortgage approvals fall as UK consumers rely on credit to keep spending
Bank of England figures for February show first fall in approvals in six months but credit card lending hits 11-year high

Angela Monaghan

29, Mar, 2017 @12:07 PM

Article image
Why UK house prices could plunge by 20% after the latest interest rate hike
Property market has defied gravity for years but analysts say rising mortgage rates will mirror the 1980s price crash

Larry Elliott Economics editor

28, Jan, 2023 @8:00 AM

Article image
Mortgage approvals fall to 18-month low after Brexit vote
Banks and building societies approved 60,912 mortgages in July, lowest monthly total since January 2015, figures show

Phillip Inman Economics correspondent

30, Aug, 2016 @12:18 PM