Mortgage approvals have fallen to their lowest level since the pandemic in December, according to the Bank of England.
The number of matched home loans fell to 35,612 in the last month of 2022 from 46,186 in November.
The bank said it was the lowest monthly rate of mortgage approvals since May 2020, when the UK economy was in the midst of the first Covid-19 lockdown.
Barring the pandemic, the second lowest was in January 2009, when the UK was mired in recession in the wake of the global financial crisis.
The bank said its effective interest rate – the rate actually paid on new mortgages – rose 32 basis points to 3.67% in December. Interest rates are expected to rise again when the bank’s monetary policy committee meets on Thursday.
The figures also show that the annual growth rate of all consumer loans increased to 7.2 percent in December from 7 percent in November, while the growth rate of credit card loans increased to 12.4 percent from 12.2 percent.
The increase in cash on bank accounts in December was £3.9bn, compared with an increase of £5.7bn in November. Business loans rose to £1.9bn in December from £1.5bn in November.
Karim Haji, Head of Financial Services at KPMG in the UK, said: “The reality for everyone is that real disposable income has fallen and after two years of high volatility in spending, interest rates and inflation, we can expect personal balance sheets to see a period showing that consolidation must take place.”
Samuel Tombs, chief economist at Pantheon Macroeconomics in the UK, said: “Approved mortgages for homebuyers continued to fall sharply in December, although more lenders returned to the market due to fears immediately after the ‘mini budget’.
Quilter’s Karen Neue said data from the Bank of England showed the housing market “is now in a significant downturn.”
She added: “In the past few months, we have seen a significant drop in demand. Although mortgage rates are down slightly from their peak at the end of last year, monthly costs remain much higher than many people have become accustomed to in recent years.
“Combined with rising energy prices – especially now that winter has truly arrived and people are becoming more dependent on their heating – we may be entering a period where more people are considering listing their property for sale in favor of a cheaper home.
“While the decline in consumer credit is positive amid rising interest rates, it could turn into a disaster if borrowing rises in the coming months and more people become dependent on credit cards to make ends meet.
“The effective interest rate on interest-bearing credit cards rose to 19.55% in December from 19.24% in November, meaning borrowers could quickly find themselves in debt if they can’t pay them back.“
Source: I News
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