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Mortgage market stagnated in August

The lending market cooled in August, with mortgage approvals falling for the second consecutive month to reach its lowest level since February.

Mortgage approval data from the Bank of England shows that approvals sat at 45,354 in August, dropping by -8.4% from 49,532 in July.

The approval data looks starker compared to August last year, when approvals were 37.3% higher at 72,321.

Jonathan Samuels, chief executive of Octane Capital, said: “After enduring rate increase after rate increase at the hands of the Bank of England, it’s little wonder that buyer appetites have diminished and this has now become clear with a consistent drop in the level of mortgage approvals seen across the market.

“While the base rate has finally been frozen, it’s unlikely that this will bring any notable turnaround so late in the day and we expect that the outlook will remain subdued throughout the remainder of this year.”

Despite the cooler market the industry has reacted positively to news of the Bank of England holding the base rate at 5.25% last month, ending a run of 14 consecutive hikes.

Karen Noye, mortgage expert at Quilter, said: “This past week has brought some much needed optimism to the mortgage market with rates falling below the 6% mark.

“However, the prolonged period of high rates has had a catastrophic impact on the housing market, as shown by both the Bank of England Money and Credit statistics and the government’s property transactions data this morning.”

She added: “Following the Bank of England’s recent pause on interest rate hikes, we should have cautious optimism that the slightly improving market sentiment will cause buyers, sellers, and investors alike to have more confidence in the UK property market.

“Whether this pause in rate hikes will manifest into a more robust housing market or merely a temporary respite remains completely linked to monetary policy decisions and the overarching economic direction.”

Francesca Carlesi, chief executove at Molo, said: “While high interest rates continue to put pressure on landlords, as evidenced by reduced mortgage approvals for UK house purchases in September, the pause on Bank of England interest rate rises earlier this month in addition to cooling demand for purchases may present some interesting opportunities for buyers.

“Dispelling uncertainty and providing transparency among buy-to-let investors should be front of mind for lenders at this time, to ensure borrowers know the investment choices and options available to them.”