Mortgage approvals and house prices fall, but could mortgage rates follow?

Mortgage approvals fell by ten percent during October, according to latest statistics published by the Bank of England, while new data shows that house prices are on the slide and sellers are now willing to accept offers.

Mortgage approvals down

Just 59,000 mortgage applications were green-lit in the month of October, representing a decrease of 7,000 from September and the lowest overall monthly count since the start of the Coronavirus pandemic.

These damning numbers have once again been attributed to the economic policy pursued by Liz Truss, where – almost immediately after the announcement of the former administration’s deeply contentious “Growth Plan” – more than 40% of the mortgage market was nullified.

Although Rishi Sunak’s new government has taken swift decisive action to calm the chaos unleashed on the markets, interest costs remain relatively high; nearly tripling during the month of October, while the net amount borrowed by debtors decreased by almost two billion pounds.

A sign of things to come?

“Mortgage approvals for the home purchases are running below long-run averages. This could be a sign of things to come” Andy McBride from Professional Contractor Mortgages, was quoted as saying. “…It looks like a number of buyers have opted to postpone acting at least until the other side of Christmas.”

House prices fall, while sellers accept lower offers

According to Halifax, house prices have now fallen for three consecutive months, with the most recent month-on-month contraction of 2.3 per cent representing the steepest drop in prices since the 2008 financial crash.

Demand has fallen off significantly, with many owners are now selling their homes for below the asking price. Estate Agent Today reports Zoopla data showing that while sellers achieved 100% of asking price on average from May 2021 through to October 2022, this has now dropped to 97%, with sellers in areas such as the South East under noticeable pressure to accept lower offers.

There is overall consensus that house prices will continue to drop next year, with the Office of Budgetary Responsibility predicting a fall of 9% for the 12 months from October 21, while some estimates from industry professionals go further still.

Some see a silver lining

There have been some promising signs for home buyers – for example mortgage rates are expected to fall to roughly five percent by the new year despite recent increases in the UK base rate, as the economy stabilises under the new chancellor.

Equally, the weaker property market has lead to an increase in the amount of housing stock for sale, meaning buyers have greater choice. The “mood music” of falling prices also gives buyers leverage in terms of making offers, potentially bringing their dream home into reach. Some see opportunities in this market, so it may still be the right time to take out a mortgage.

In turbulent times, talk to the experts…

However, these are unquestionably turbulent times. Therefore, it is imperative for prospective homeowners to solicit advice from experienced mortgage professionals before making any next steps towards buying a new home.

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