Homeowners are remortgaging at the lowest level in 24 years, with financing for house purchase levels also dropping to 43,300 in September to hit an all-year low.
Bank of England figures out today confirmed net approvals for remortgaging, which only captures remortgaging with a different lender, continued to decline from 25,100 in August to 20,600 in September, the lowest level since January 1999 at 18,300.
Net borrowing of mortgage debt by individuals decreased from £1.1bn in August to -£0.9bn in September – the lowest since April 2023.
Gross lending fell from £19.4bn in August to £18.6bn in September, while gross repayments rose from £19.0bn to £19.5bn over the same period.
Approvals continue to drop
Net approvals for house purchases, which is an indicator of future borrowing, continued to fall from 45,400 in August to 43,300 in September, the lowest level since January 2023 at 39,900.
Alice Haine, personal finance analyst at Bestinvest, said: “Mortgage approvals continued to fall in September, dropping by almost 5% as high mortgage rates caused major affordability challenges for buyers, with continued cost-of-living pressures also making it harder for buyers to secure the homes they want. Net approvals for remortgaging, which captures remortgaging with a different lender, also saw a rapid decline in September as more homeowners stuck with their existing lender rather than switch to a new provider to avoid affordability checks.
“Mortgage lending also plunged in September – a reflection of buyers treading more conservatively by shunning larger family homes in favour of smaller, lower-value homes to meet lenders’ affordability criteria. The shift in buyer appetite and uncertain economic outlook is likely to result in further weakening in mortgage lending in the coming months.”
Steve Seal, CEO, Bluestone Mortgages added: “Following a sharp fall in consumer confidence, it’s no surprise that mortgage approvals have sunk as consumers continue to battle affordability challenges. However, with expectations for homebuyer and homeowner support in the upcoming Autumn Statement, this could signal that hope is on the horizon.
“For those worrying about how they can take their first or next steps onto the property ladder in the current inflationary environment, now is the time to speak with a mortgage broker. These professionals have a key role to play in signposting potential and existing borrowers to the best available options for their unique circumstances so that they, too, can achieve their homeownership dreams.”
Net interest rate payments
The figures confirmed the ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages saw a 19 basis point increase and now sits at 5.01%.
Ben Waugh, managing director at more2life, said: “Net borrowing of mortgage debt by individuals has dropped slightly for the first time since April, but this blip should not deter from the return of confidence we are anticipating across the market as interest rates begin to steady. Many first-time buyers who have been waiting patiently for a more favourable climate before taking their first steps onto the property ladder could choose to do so during the latter stages of the year.
“However, given the turbulence of the last 12 months, a lot of younger borrowers will still be looking toward family members for a financial boost. Homeowners over the age of 55 might consider unlocking wealth from their property to facilitate this support.”
Credit cards, loans and unsecured debt
According to the statistics, net borrowing of consumer credit, including credit cards and loans by individuals, amounted to £1.4bn in September, down from £1.7bn the previous month.
Haine said: “Consumers either tightened their belts to avoid taking on expensive debt or benefitted from generous pay rises as wage growth continues to ramp up.
She added: “Turning to credit to fund everyday living costs is rarely a good move, considering the effective rates on overdrafts and interest-bearing credit cards are very much on the rise.”
Households withdrew £0.7bn from banks and building societies in September. This was driven by net outflows from interest-bearing and non-interest bearing deposit accounts of £6.2bn and £2.8bn respectively. These were partly offset by net flows of £5.3bn into time deposit accounts, which were down from inflows of £8bn in August.
Haine said: “Thanks to easing inflation – now significantly lower than a year ago – savers are the real winners in this high interest rate environment with the effective interest rate – the actual interest paid on new fixed accounts – rising by nine basis points to 5.21%.
“Most accounts still deliver a negative return once inflation is considered, though the gap between inflation and the highest interest savings accounts is narrowing fast. The real concern is that households cannot benefit from better savings rates, instead raiding their savings pots as disposable incomes get swallowed up by high living costs.”
During September, UK non-financial businesses withdrew £4.4bn from banks and building societies in all currencies, following net deposits of £3.2bn in August.