Mortgage approvals continued to show signs of improvement in May, rising to 55,500 for the month as a whole up across the UK – up from 49,000 for the month of April, new data shows.
The data provided by the Bank of England (Boe) is a fresh kick in the teeth for prospective buyers, who are now hesitant to secure a mortgage as rates on deals have soared since the central bank made the decision to hike interest rates by 0.5 per cent.
According to Moneyfacts, the average rate for a five-year fixed term mortgage now sits at 5.83 per cent, up from 5.17 per cent since the start of June.
It’s also been a source of pain for those looking to remortgage homes, with the rates impacting their repayment costs.
Fresh data from Octane Capital, has also revealed that the average homeowner looking to remortgage in the current market will pay over £23,000 more in interest over the lifetime of their new mortgage term.
In early spring, the housing sector was showing signs of a steady recovery, with previous BoE data showing approvals for house purchases rose “significantly” to 52,000 in March from 44,100 in February, as recovery from the September mini budget was fully in swing.
However, following the 13th consecutive rate rise by the bank last week, it’s unclear what the figures may look like in next month’s publication.
Reports released by estate agent Zoopla earlier in the week highlighted to markets the immediate impact of the decision.
Over the last four weeks, Zoopla also recorded a 14 per cent fall in buyers in the market over the last four weeks compared to a year ago.
“As a business, May and June have seen steady levels of mortgage transactions. However, we’ve seen a marked slowing down in new buyer interest over the past couple of weeks, no doubt due to the worsening inflation and base rate forecasts,” Graham Cox, founder of Selfemployedmortgagehub.com said.
“Remortgage enquiries remain strong, as people look to secure a new deal before rates rise even further. For those who delay, or allow themselves to be moved onto the lender’s standard variable rate, the pain could be acute, potentially paying three to four times the interest rate they were on previously.”
He added: “The next six months are likely to remain challenging, as prospective buyers wait for both house prices and interest rates to fall. The former is almost certain, the latter not so much.”
Myron Jobson, senior personal finance, interactive investor, said that May proved to be a month of “calm before the storm rocked the mortgage market in June”.
“While there was a modest uptick in mortgage approvals and remortgaging last month, they remained below their respective 10-year averages as the housing affordability squeeze continued to price many out of the market.
“Housing sentiment has flipped on its head following a nightmare month of June for those in the market for a home loan. Lenders have pulled and repriced their deals on market expectations that interest rates are set to soar beyond revised estimates and stay higher for longer.
“The recent ugly inflation data could also spell more mortgage misery for those at or nearing the end of their fixed rate deals.
He added: “The stark reality is while house prices are on the wane, those seeking a home have found themselves in the clutches of a mortgage affordability squeeze not felt since the aftermath of the ill-fated mini-Budget back in September last year and the subprime crisis, which erupted back in 2007.
“For first-time buyers, rising rents don’t help matters, scuppering attempts to build a big enough deposit to buy a house.”