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UK mortgage approvals sunk to a two-and-a-half year low last month, with would-be home buyers deterred by rising rates, figures from the Bank of England showed Tuesday.
Mortgage approvals for house purchases fell to 35,600 in December from 46,200 in November. December’s figure was the lowest since May 2020. The housing market had re-opened from lockdown measures around halfway through that month.
December’s reading was the fourth-successive decline in mortgage approvals.
The BoE noted the ’effective’ interest rate paid on newly-drawn mortgages increased by 32 basis points to 3.67% in December. The BoE’s own benchmark interest rate is 3.50%. Its Monetary Policy Committee meets this week, with a rate hike of 50 basis points to 4.00% expected, according to consensus cited by FXStreet.
Mortgage rates have been on the up since an ill-fated fiscal plan spooked investors and contributed to the departures of ex-chancellor Kwasi Kwarteng and former prime minister Liz Truss last year.
The ’mini-budget’ sent the pound into free-fall, bond markets into a tailspin and raised borrowing costs in autumn.
Effective interest rates stood at 3.35% in November, having risen from 3.09% in October and 2.84% in September.
Net borrowing of mortgage debt fell to £3.2 billion in December, from £4.3 billion in November.
The BoE noted consumers borrowed another £500 million net in credit in December, down from the £1.5 billion borrowed in November.
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