Gross mortgage repayments increased to £20bn in August, up from £19.8bn in July, according to the Bank of England’s latest Money and Credit report.
Net mortgage approvals, which account for cancellations and provide an indication of future borrowing, fell by 500 to 64,700 in August.
Remortgage approvals also declined, dropping by 900 to 37,900 during the same period.
The effective interest rate – the actual rate paid on new mortgage contracts – continued to decline for the sixth consecutive month, reaching 4.26% in August.
Meanwhile, the average interest rate on the outstanding mortgage stock edged up slightly from 3.88% to 3.89%.
The report highlighted that net mortgage borrowing decreased by £200m month-on-month to £4.3bn in August, following a £900m decline to £4.5bn in July.
On an annual basis, the Bank of England recorded net mortgage lending growth of 3% in August, up marginally from 2.9% in July.
Simon Gammon, managing partner, Knight Frank Finance, said: “The mortgage market remains remarkably steady. Net approvals for house purchases have moved by fewer than 1,000 month-on-month for the past three months, with August’s figure dipping only slightly to 64,700. Lending rates have also held firm since the last Bank of England decision, reinforcing a broader picture of stability – activity is consistent, and borrowers have largely adjusted to the current rate environment.
“That said, at the top end we’re beginning to see a touch of hesitation ahead of the Budget. Some high-value buyers are choosing to wait for greater clarity around potential tax changes before completing transactions, which could make the coming months quieter for those discretionary purchases.”
According to Jeremy Leaf, north London estate agent, mortgage approvals always set the scene for housing market activity over the next few months but unfortunately these do not paint a particularly pretty picture.
“The impact of Budget rumours in particular which began swirling at the end of the period covered in this data is inevitable, resulting in fewer listings and buyers, as well as price renegotiation and slower transactions,” he explained. “However, the overwhelming majority of sales in our offices are holding together although some vendors clearly still need a dose of realism.”
Richard Donnell, executive director at Zoopla, commented: “The demand for mortgages cooled in August with 500 fewer approvals for mortgages to buy homes, down to 64,700. It appears that higher borrowing costs and broader economic uncertainty are prompting a pause for reflection among homebuyers. Demand for homes at the upper end of the market is already being hit ahead of the Budget as speculation grows over possible changes to the taxation of high value homes.”
Nathan Emerson, CEO of Propertymark, concurred: “Continued economic uncertainty and a traditionally quieter period during the summer holidays, alongside anxiety over the UK Government’s upcoming budget and decisions being made on interest rates, have perhaps contributed towards this decrease in mortgage approvals.
“However, the Bank of England’s freeze on interest rates last week will contribute to future confidence and stability in the mortgage market now that people on variable mortgages and those looking to finance their next home move have additional reassurance of static rates for now. We now look to November, which is when the next interest rate decision will be made.
“It is important that consumers monitor upcoming mortgage deals, as they can vary significantly given current economic circumstances.”
Jason Tebb, president of OnTheMarket, added: “Despite August being a traditionally quieter time of the year for the housing market, and in face of wider political and economic concerns, there was remarkable resilience with approvals for house purchases – an indicator of future borrowing – dipping only slightly on the previous month.
“With the rate on newly-drawn mortgages falling again for the sixth consecutive month, affordability challenges continue to ease. Five base rate reductions from the Bank of England in the past year have helped, along with recently relaxed lending rules, enabling many buyers to boost their borrowing.”
