Home purchase mortgage approvals dip as buyers ‘pause for reflection’

The number of mortgage approvals made to home buyers dipped in August, according to Bank of England figures.

Some 64,680 mortgages for house purchase were approved in August, down from 65,161 in July.

There were also around 900 fewer remortgage approvals during August, the report said. The remortgaging figures only capture remortgaging with a different lender.

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: “The holiday period may have dampened buyer activity, with many prospective buyers away on summer breaks.

“The drop in mortgage approvals suggests the housing market is beginning to stutter as it adjusts to the end of the stamp duty tax break and prepares for the autumn Budget.

“Higher purchase costs have resulted in more muted property price growth in recent months as buyers negotiate harder to keep purchases affordable and sellers adjust their expectations and price homes more competitively to secure a sale.”

Simon Gammon, managing partner, Knight Frank Finance, said that “borrowers have largely adjusted to the current rate environment”.

But he added: “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.”

Property website Zoopla said on Monday that home buyer demand for properties priced at more than £500,000 had softened in recent weeks.

Richard Donnell, executive director at Zoopla, said: “It appears that higher borrowing costs and broader economic uncertainty are prompting a pause for reflection among home buyers.

“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.”

Lucian Cook, head of residential research at Savills, said: “Slightly weaker mortgage approvals in August reflect a finely balanced housing market, where interest rate cuts have been slow to feed through into improved buyer sentiment.

“This reflects concerns over what the Budget may hold, which have weighed particularly on the top end of the market that would normally be expected to lead a housing market recovery.”

Nathan Emerson, chief executive of property professionals’ body Propertymark, said: “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.”

Jeremy Leaf, a north London estate agent, said: “The overwhelming majority of sales in our offices are holding together although some vendors clearly still need a dose of realism.”

Looking at non-mortgage lending, the Money and Credit report said that people’s net borrowing of consumer credit “remained flat at £1.7 billion in August”.

Within the figure, net borrowing through credit cards slightly decreased, while net borrowing through other forms of consumer credit, such as car dealership finance and personal loans, slightly increased.

Karim Haji, global and UK head of financial services at KPMG, said: “With the energy price cap set to rise from October and inflation still elevated – particularly for essentials like food and utilities – households face mounting pressure on disposable incomes just as colder months increase energy usage.”

Households’ deposits with banks and building societies increased by £5.4 billion in August, following a net increase of £7.1 billion in July.

Mark Hicks, head of active savings, Hargreaves Lansdown, said: “The savings boom decelerated very slightly in August, but savers still managed to squirrel away another £5.4 billion.”

He added: “With savings rates still available around 4.5%, the prospect of safety and certainty of returns and an inflation beating rate continues to encourage savers.”

In August, UK non-financial businesses borrowed, on net, £3.2 billion of loans from banks and building societies, including overdrafts. This followed net borrowing of £5.3 billion in July.

The annual growth rate of borrowing by big businesses increased to 8.6% in August, from 8.1% in July. The annual growth rate of borrowing by SMEs (small and medium-sized enterprises) increased from 1.0% to 1.2% – the highest level since August 2021, when the rate was 1.3%.