Some positive news has emerged regarding the economy as early Spring marked an upturn in the number of mortgage applications being approved. The figures are encouraging as they come off the back of an extended period of below average lending for house purchases, viewed by the government as one of the mainstays of the British economy.
The Bank of England has reported that approvals in 2022 sat at just above 60,000 a month, although most of this was achieved in the first eight months of the year. The period since the ill-fated mini-budget of the Truss premiership has seen figures drop sharply as interest rates rose, making mortgages unaffordable for many.
Lending markets stabilising
Intervention by the Bank of England during Q4 of 2022 and into 2023 does seem to have calmed the lending markets. Raising the base interest rate, has resulted in mortgage rates falling back to the levels seen in the period immediately before the spike caused by the Truss/Kwarteng budget.
The 18% rise in approvals that took place between February and March still highlights the scale of drop off that took place in late 2022. In March 23, there were around 52,000 approvals, compared to just 44,000 in February. But when considered against the 2022 average noted above, one can see how far the market needs to row back. But this increase is being seen as the first step on the road to recovery.
Recent trend in mortgage approvals is still low
Despite a solid average in 2022 and what appears to be an uptick in early 2023, mortgage lending is still below the average for much of the last decade. Needless to say, the covid pandemic created a shock to the system and saw mortgage numbers and housing transactions dip rapidly, but even without this the trend has been weak.
There are various hypotheses behind why this may be, including the rise in house prices and the impact this has had on affordability. But there has also been a general expectation that interest rates would begin to rise following an historic period at near zero rate and this may have left those sat with mortgages on highly competitive rates, uneasy about the idea of moving and having to reapply at a higher level.