Mortgage approvals fall faster than expected in wake of Budget
The number of mortgages approved by the UK banking sector fell faster than expected in November, according to figures from the Bank of England.
65,700 mortgages were approved in November, down from 68,300 in October and comfortably below economists’ expectations.
This put the number of mortgage approvals at its lowest level since August while approvals for remortgaging also fell by 300 in November.
The figures add to a growing body of evidence that the economy has slowed significantly in the aftermath of the government’s first Budget.
“November’s money and lending data suggests that households’ caution with their borrowing and saving ahead of the Budget hasn’t gone away,” Elias Hilmer, assistant economist at Capital Economics said.
In the Budget, Chancellor Rachel Reeves hiked taxes and increased borrowing to fund a £70bn annual increase in public spending. This prompted financial markets to scale back their expectations of further monetary easing in 2025, putting upward pressure on mortgage rates.
Hilmer suggested that the continued increase in swap rates will “probably weigh on mortgage approvals” in the months ahead.
Despite the monthly drop, the number approvals for new mortgages and remortgaging still remained comfortably above the 12-month average.
The figures showed that the annual growth rate for net mortgage lending rose to 1.3 per cent in November, up from 1.1 per cent in October, continuing the upward trend seen since April.
Looking across 2024 as a whole, the housing market performed well compared to the recent past, fuelled by an improving economy and lower interest rates.
The number of mortgages approved in October was the highest level since the mini-Budget while data out earlier this week showed that average house prices ended the year near record highs.
The figures also showed that consumers borrowed £900m in November, down from £1bn the previous month and below the six-month average of £1.2bn.
“This suggests households have become a bit less willing to take on more unsecured credit and it chimes with the retail sales figures which indicate households reined in their spending in Q4,” Hilmer said.