Net mortgage borrowing fell by nearly £3bn in June, according to the Bank of England’s monthly money and credit figures, which experts say shows the "frenetic" state of the housing market is coming to an end.
The data showed net borrowing of mortgage debt decreased to £5.3bn in June, down from £8bn in May.
But borrowing remains above the pre-pandemic average of £4.3bn in the 12 months up to February 2020.
The figures also showed approvals for house purchases, an indicator of future borrowing, fell for a fifth month in a row, decreasing to 63,700 in June, from 65,700 in May.
This is below the 12-month pre-pandemic average up to February 2020 of 66,700.
Property platform Twindig's chief executive Anthony Codling said this showed the housing market was on path to a more normal level of activity following a “frenetic” two-year period
He said the normalising of this activity was “punctuated by working from home, races for space and stamp duty holidays”.
Tomer Aboody, director of property lender MT Finance, said these falls were not surprising and reflected some of the heat coming out of the market.
"With improved supply levels helping satisfy buyer demand, the pace of house price growth is also likely to slow as more balance returns to the market," he said.
Aboody also said with the prospect of higher mortgage rates, "buyers are taking advantage of the last remaining lower rates before the inevitable spike, with those remortgaging desperate to lock into a fixed-term mortgage for as long as possible".
Meanwhile, the figures also showed approvals for remortgaging, which only capture remortgaging with a different lender, decreased to 44,000 in June, from 47,200 in May.
This remains below the 12-month pre-pandemic average up to February 2020 of 49,500.
The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 20 basis points to 2.15 per cent in June, while the rate on the outstanding stock of mortgages ticked up 4 basis points, to 2.11 per cent.
Steve Seal, Bluestone Mortgages’ chief executive, said that with inflation reaching a 40-year high and the strain on people’s finances as a result of the cost of living crisis he expected to see a growing number of customers turned away from the mainstream mortgage market.
“For these individuals, it’s important to remember that hope is not lost. There are specialist lenders out there that can cater to their needs and have a range of solutions to help them climb onto or up the property ladder still. Ultimately, all lenders have the responsibility to ensure customers are pointed in the right direction so that they can make their homeownership dream a reality,” he said.