Mortgage cancellations on the rise, BoE data shows

Using data from the Bank of England, debt advisory specialist Sirius Property Finance analysed the patterns of approvals and mortgage offers over the past few years.

Its analysis suggests that while a cooling housing market has led to fewer mortgage approvals, a greater degree of mortgage sector turbulence has seen an increase in the number of mortgage offers being cancelled as a proportion of all mortgages approved.

This demonstrates the far trickier landscape buyers are having to negotiate. Nicholas Christofi, Sirius Property Finance

Looking at the gross number of approvals and cancellations, the data showed that 891,990 mortgages were approved in 2022, an average of 74,333 per month.

But this marked an 18.4 per cent drop on the previous year, when gross approvals hit a 10 year high of almost 1.1mn. The 891,990 approvals seen in 2022 was also the lowest annual total since 2018. 

At the same time, fewer mortgage approvals also led to a decline in mortgage cancellations, with 136,970 cancellations being seen throughout 2022, a drop of 13.8 per cent on the previous year, as the table below shows.

^{Source: Sirius Property Finance/Bank of England}

However, not only was this total number of cancellations the second highest in the last 10 years, Sirius' analysis suggested this was the highest proportion when compared to total approvals seen in the last decade. 

In 2022, mortgage cancellations accounted for 13.3 per cent of all gross mortgage approvals, creeping up by 0.6 per cent compared with 2021, and the highest level of mortgage market instability seen since 2013. 

Managing director of Sirius Property Finance, Nicholas Christofi, said: “As interest rates have continued to climb, it’s not only had an impact on the appetite of the nation’s homebuyers, but it’s led to a growing level of mortgage market instability.

"While both the volume of mortgage approvals and cancellations have dropped, the number of cancellations as a proportion of mortgage approval market activity has actually climbed to its highest level in the last decade.

"This demonstrates the far trickier landscape buyers are having to negotiate when it comes to the higher cost of borrowing and the reluctance that many have had in following through with a mortgage offer as interest rates have risen.”

Economic outlook

The findings came amid a mixed outlook for the UK, with recent news from the International Monetary Fund that Britain has narrowly avoided a recession, with monthly GDP for February 2023 remaining flat over the month, below consensus estimates of a 0.1 per cent rise.

Commenting on the recent UK economic numbers, Modupe Adegbembo, G7 economist at Axa Investment Managers, said the company continued to expect the MPC to hike by a further 25 basis points at their next meeting on 4 May, bringing bank rate to 4.5 per cent, where AxaIM expects it to pause its hiking cycle.

Adegbembo said: "We think this will be a close call and upcoming data on labour market and consumer price inflation will have considerable weight in decision making.

"Overall, we do not expect the Bank of England to keep rates in restrictive territory for long as we expect adjustment via the labour and housing markets to see, we think the MPC will begin to cut rates from Q4 2023 and pencil in cuts of 25bp a quarter out to end 2024 bringing bank rate to 3.25 per cent."

With rates expected to be cut, feeding through to potentially lower mortgage products available to consumers, this could be beneficial for the UK mortgage market. 

As reported by FTAdviser yesterday (April 13), mortgage brokers have been breathing 'sighs of relief' over a period of relative calmness with regard to mortgage rates. 

However looking at the market more broadly, mortgage brokers told FTAdviser that borrowers needed to consider more than just the headline rate when deciding what deal to choose. 

simoney.kyriakou@ft.com