Mortgage approvals for home purchases continued to decline in August as the housing market continued to cool and borrowers were increasingly negotiating prices, experts say.
The Bank of England’s latest money and credit report showed that debt rescheduling approvals fell from 75,100 in July to 74,500 in August, and debt rescheduling approvals also remained low at 39,700 compared to the months before the pandemic.
Meanwhile, net borrowing in August was £ 1.4 billion below the 12-month average through June 2021 – the period favored by the government’s stamp duty holidays.
Dean Esnard, director of the London broker Magni Finance, said: “August was definitely quieter than the months before.
“September picked up speed again, although the intensity is not as high as buyers believe that now that the market has cooled there is more room for negotiation.”
Scott Taylor-Barr of Shropshire-based consulting firm Carl Summers Financial Services agreed: “August and September have certainly been calmer on the application front.”
He added, “I have certainly seen an increase in the number and value of devaluations recently, with more appraisers disagreeing with the prices people seem to be asking for real estate.”
Karen Noye, Quilter’s mortgage expert, said “It is clear that we are seeing a slowdown in the market,” with the amount of mortgage debt being borne by individuals “dramatically” falling to £ 5.3 billion.
“To put this in perspective, in June – the last month of full stamp duty – net borrowing was a record £ 17.7 billion,” she said.
“The housing market is clearly starting to flag now that some of the government programs like stamp duty leave are abolished.”
But Noye added that the market did not collapse as some predicted. She said: “Right now, most statistics suggest that the housing market is flattening at a measured pace, as opposed to a sharp decline, but if the virus returns in a vengeance this winter, combined with sky-high cost of living from a lack of gas, everyone can.” Betting “be off.
“The next few months can be turbulent and could have a major impact on events approaching the end of 2021.”
Penalties for lower prices
Borrowers are also spying on leeway to lower the interest they are paying on their current mortgages.
With interest rates at all-time lows, brokers have seen their clients swallow penalties to prematurely terminate their mortgages and benefit from lower interest rates.
Esnard stated, “On the debt restructuring front, borrowers have been keen to switch products to take advantage of record low interest rates, with some even paying a fine to end their current business prematurely.”
Mark Dyason of independent mortgage broker Edinburgh Mortgage Advice said debt rescheduling will help boost demand from now through Christmas.
“Debt rescheduling will drive the market over the winter as interest rates continue to fall and everyone looks for savings to offset the rising cost of living,” he said.
In large part, this is because borrowers are aware that these interest rates won’t be on the shelves for long.