Mortgage approvals for house purchases ticked down further in August, as the housing market continued to cool and borrowers are increasingly negotiating prices, according to experts.
The Bank of England’s latest Money and Credit report showed remortgage approvals fell from 75,100 in July to 74,500 in August, and remortgage approvals also remained low compared to the months before the pandemic, sitting at 39,700.
Meanwhile, net borrowing in August sat £1.4bn below the 12 month average to June 2021 - the period buoyed by the government’s stamp duty holiday.
Dean Esnard, director at London-based broker Magni Finance, said "August was definitely quieter than the months before.
“September has picked up again although there is not as much intensity as buyers feel there is more room for negotiation now that the market has cooled down.”
Scott Taylor-Barr of Shropshire-based advice firm Carl Summers Financial Services, agreed: "August and September were certainly quieter on the applications front”.
He added: “I have certainly seen a rise in the number and value of down-valuations recently, with more surveyors disagreeing with the prices people seem to be offering for property."
Karen Noye, a mortgage expert at Quilter, said “it’s clear that we are starting to see a slowdown in the market”, with the amount of mortgage debt taken on by individuals reducing “dramatically” to £5.3bn.
“To put this into perspective, in June - which was the last month of the full stamp duty holiday - net borrowing was a record £17.7bn,” she said.
“Clearly the housing market is starting to flag after the removal of some of the government schemes such as the stamp duty holiday.”
But Noye added the market had not crashed as some predicted. She said: “At present, most statistics point to the housing market deflating at a measured pace opposed to a significant drop but if the virus comes back this winter with a vengeance, coupled with sky high living costs due to gas shortages, all bets may be off.
“The next few months may be turbulent and could heavily impact what happens as we approach the end of 2021.”
Penalties for lower rates
Borrowers are also spying wriggle room to lower the interest they’re paying on their current mortgages.
With interest rates sitting at historic lows, brokers have seen their clients swallow penalties to end their mortgages early and take advantage of lower rates.
Esnard explained: “On the remortgage front, borrowers have been keen to switch products to take advantage of record low rates with some even paying a penalty to end their current deal early.”
Mark Dyason of independent mortgage broker Edinburgh Mortgage Advice said remortgages will help to drive demand from now until Christmas.
“Remortgages will power the market during the winter as rates fall further and everyone looks for savings to offset rising living costs,” he explained.
This is in large part down to borrowers being aware these rates won’t be on the shelves for long.
Aaron Strutt, product and communications director at broker firm Trinity Financial, said: "We're finding lots of buyers are getting their mortgages agreed in principle so that they can go property hunting with confidence,” Strutt explained.
“They want to take advantage of the cheap mortgages while they can because they know they will not be around forever.”
ruby.hinchliffe@ft.com
