UK Mortgage Approvals Falls

The number of new mortgage approvals in the UK fell in November to its lowest level since August 2016 at 39507 according to UK Finance. The level of fresh approvals is a 5% decline on the November 2016 level and coincided with a decision by the Bank of England to raise interest rates (which affect mortgage rates, of course) to their pre-Brexit referendum level of 0.5%. However, the abolition of “stamp duty” (a purchase tax) on homes costing up to £300000 for first-time buyers, ought to have offset this, however its effect may not become clear until the December data is available as it will represent the first full month with the new tax reduction in force. The marginal increase in the interest rate was the first seen in a decade, following the Global Financial Crisis.

The EY Item Club is predicting that house price inflation in 2018 will be muted at 2% (with significant regional variation, of course). Whilst the number of mortgage approvals dipped, the sums being lent actually increased by 13% year-on-year to £13.9 billion.

The UK mortgage market is the largest in Europe. There are currently 11.1 million homes with mortgages on them, representing a total current market of £1.3 trillion. In 2016, UK mortgages taken out were worth £245 billion. There were 7700 repossessions of houses due to failures to meet mortgage repayment obligations, representing just 0.03% of all loans (2015 data), to give an indication of the current stress within the sector. However, 94100 households were more than 2.5% in arrears with their mortgage repayments – these loans would be vulnerable to a downturn in the employment market in the UK or further increases in the cost of living (inflation) or an additional interest rate increase. That figure represents 0.91% of mortgages outstanding in 2015.

The “average” price of a home in the UK stood at £223 807 in October 2017 and average household income (median) was £23 556.

The relative strength of the Pound has no direct effect on the affordability of mortgages, however, if the Pound falls, it makes the cost of imported goods (and transportation costs for domestic goods) higher which has an effect on disposable incomes and therefore the affordability of a mortgage.

Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.