UK mortgage approvals are set to fall by 24% in 2023 compared to the year before, underpinning just how difficult a year it’s been for the market.
The research comes from estate agent comparison site, GetAgent.co.uk, which analysed monthly mortgage approvals over the past five years.
Between January and October 2023 an average of 47,602 mortgages were given the green light per month, which would bring the total to 571,219 if that trend continued in the final two months of the year.
This will be the second year in a row that mortgage volumes have fallen significantly, as they dropped by -20% between 2021 and 2022, from 937,093 to 752,131
From that peak in 2021 approvals are set to drop by -39% this year, amounting to 365,874 fewer mortgages.
Impact of mortgage rates
It’s no coincidence that falling transactions have coincided with rate increases, as the Bank of England raised the base rate from 0.10% in December 2021 to 5.25% in August 2023, in a bid to combat double-digit inflation.
This has made mortgages far more expensive. As a result many potential homeowners have been forced to delay their plans, while investors are choosing to put their money into other assets offering better returns.
Market to rebound in 2024
After last week’s decision from the Bank to hold the base rate for a third consecutive time the market is finally benefitting from some stability.
The cost of lenders’ funding is also falling, so mortgage rates could become more competitive as we enter into 2024, reversing the trend we’ve witnessed over the past two years.
Next year could be a better one than 2023, though it’s unlikely to reach the peak achieved in 2021. Indeed, that year the market was heavily fired up by the government’s stamp duty holiday, with people rushing to buy before the reduced period ended. Meanwhile the market was underpinned by a record low base rate of 0.10% for most of the year.
Co-founder and CEO of GetAgent.co.uk, Colby Short, commented:
“There’s no getting around it, 2023 has been a difficult year for the property industry, as higher mortgage rates have dragged down people’s ability to buy.
“The one positive is the Bank of England has left the base rate unchanged since August 2023, which is helping people adjust to a new normal, as well as raising the potential for rate cuts in the new year.
“The market is likely to experience a recovery in 2024, though it surely won’t reach the heady heights of 2021, when the base rate was 0.10% and there was a stamp duty holiday for much of the year.”
