New mortgage figures from the Bank of England reveal the extent of the market lull in April.
Overall borrowing fell from £39.9 billion in March to £16.9 billion last month, which was the largest fall since June 2021
A rush to get deals done ahead of the end of Stamp Duty relief on April 1 was then followed by a big drop in property transactions.
Record fall
The latest figures from HMRC, released last week, showed a 64% fall in property transactions compared to March, and 28% lower than the same time last year.
This was the highest month-on-month decrease since records began for non-seasonally adjusted figures.
Now the Bank’s Money and Credit data also shows how April marked a brief slump in the property market.
Bounce back
But the market appears to have bounced back last month. Nationwide’s HPI revealed this week that house prices rose by 0.5% in May, and by 3.5% on an annual basis with the average hitting £273,427.
Other Bank figures show that mortgage approvals for house purchases decreased for the fourth consecutive month in April, by 3,100 to 60,500.
By contrast, approvals for remortgaging with a different lender increased by 1,600 to 35,300 in April, following an increase of 1,000 in March.
The interest rate on newly drawn mortgages slightly decreased, to 4.49% in April. However, the rate on existing mortgages increased to 3.86% from 3.84%.
Industry reaction
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “Always a good indicator of future market activity, these mortgage approval numbers may have dropped for the past four months, but don’t tell the whole story.
“Firstly, the change has proved to be relatively modest and buyers may be pausing but are still proceeding with their moves, as they take advantage of lower repayments and greater availability of higher loan-to-value mortgages,” he says.
“Secondly, we do not expect too much change going forward, particularly as most seem to accept now that base rate is unlikely to fall as far and as fast as anticipated.”
Jason Tebb, President at OnTheMarket, says: “While approvals for house purchases, an indicator of future borrowing, dipped again in April for the fourth consecutive month, market stability and buyer confidence continues to be steady.
“With the rate on newly-drawn mortgages falling again in April, while the rate on outstanding mortgage stock rose slightly, overall there are signs that affordability is easing a little,” he says.
“Four rate reductions since August have helped, along with lenders easing criteria, but mortgage rates are still higher than many have grown used to in recent years.”
Tomer Aboody, Director at MT Finance, says: “With net borrowing dropping sharply in April once the stamp duty holiday had ended, this is further evidence of how the housing market reacts to stamp duty changes.
“Many buyers pushed transactions through in March in order to save themselves money. With fewer approvals for house purchases for several consecutive months, we are seeing the effects of constantly hitting would-be buyers.”
Mark Harris, CEO at SPF Private Clients, says: “With mortgage approvals falling slightly again in April, the market is bumping along.
“The effective interest rate paid on new mortgages fell slightly to 4.49 per cent in April and since then, we have seen lenders trim their mortgage rates further.
“However, with the rate on the outstanding stock of mortgages rising slightly to 3.86 per cent, affordability remains a concern,” he says.
“Remortgaging numbers rose by 1,600 in the month, following a rise of 1,000 in March, suggesting that borrowers are keen to shop around for better deals even if it means the hassle of applying to another lender.”
Stephanie Daley, Director of Partnerships at Alexander Hall, says: “So far this year, we’ve seen an average of around 64,000 mortgages being approved on a monthly basis which is the highest level seen since 2001, and really highlights just how strongly the market is currently performing despite volumes cooling on a monthly basis.
“The marginal monthly decline in approval volumes is simply a case of the market resetting in the run up to, and immediately following, the stamp duty deadline at the end of March and won’t derail the momentum that has been building consistently over the last 12 months.”
Jonathan Samuels, CEO at Octane Capital, says: “A month on month reduction in mortgage approvals was always on the cards in April, as the market paused for breath following a period of heightened activity driven by the rush to beat another stamp duty deadline.
“However, we’ve since seen a surge of buyer activity from those who have been waiting for the dust to settle and this renewed activity has only intensified since the Bank of England cut interest rates to 4.25% at the beginning of May.”
Simon Gammon, Managing Partner at Knight Frank Finance, says: “There was a significant drop in net borrowing in April because so many deals were squeezed through in March to beat the stamp duty deadline.
“Approvals for house purchase are a much better barometer of the health of the market as they reflect buyer intent at an earlier phase,” he says.
“On that front, the market looks solid but unspectacular. Approvals are tracking about 10% below the 2019 average and are unlikely to improve markedly without further, sustained falls in mortgage rates.”
Richard Donnell, Executive Director at Zoopla, says: “A slowdown in demand for mortgages in April reflects the impact of a late Easter.
“We expect mortgage data for May to increase in line with a pick up in new sales being agreed, which are running at their highest level for 4 years. A key factor is also lenders relaxing affordability tests, which is delivering the average home buyer up to 20% more borrowing capacity compared to a few months ago. We expect a busy June as buyers look to secure sales before the summer holidays kick in.”
Nathan Emerson, CEO of Propertymark, says: “As the global economy continues find a new balance, many people are acutely aware there could be challenges ahead regarding overall affordability when approaching the buying and selling process.
“We are starting to see more competitive mortgage deals from key lenders, but the eligibility criteria in some cases remains extremely rigid and limited.
“Many people may have also been temporarily deterred from potentially moving house following Stamp Duty threshold hikes across England and Northern Ireland from the start of April.”