Mortgage approvals for house purchases have been steadily rising over the past few months, but February proved to be the month when all that changed. Approvals fell by 1.2% in February – the first time a fall has been noted for six months. January saw 69,114 mortgage approvals granted, and this fell by 799 to 68,315 in February. The new figures come from data released by the Bank of England.
Remortgaging loans also experienced a fall, dropping from the 45,859 seen in January to 43,822 in February – a drop of 2,037. The total drop across all mortgage types was almost 3,000, sliding to 125,622 total mortgage approvals for the month.
Darren Pescod, managing director of The Mortgage Broker, suspects this is a blip in the mortgage market based on month on month figures. “We may well see a slowdown in the housing market this year,” Darren said, “but this could be mitigated by a lack of housing, which might keep prices higher than they would otherwise be. Consumer spending is down when compared to January this year too, which may mean consumers are feeling more cautious. This in turn could have a knock-on effect on the housing market.”
How big a role does the economic outlook play in house purchases?
If there are signs that significant changes could come into play, people are more prone to holding back on major purchases. This applies just as much to buying property as it does to other major buys. January saw a rise of £1.6 billion in consumer spending, but this fell to £1.44 billion in February. People may be uncertain of the future with the triggering of Article 50 and the beginning of the Brexit process. This may affect the market in the coming months.
The referendum did not have any such effect when the Brexit vote became clear, but since it would be some time before the official notification was made, it’s possible there is a delayed reaction. Conversely, this may simply be a blip, and we may all be surprised by more encouraging figures next month.
Credit card lending rose last month, however, reaching an increase of 9.3% as it did so. This was the highest rise in 11 years. Credit is perhaps more easily available in credit card form than it is against a property, or indeed to find a mortgage to buy a property. This goes some way to explain why mortgage approvals have dipped, and credit card borrowing has risen. Many people would rather borrow on credit cards to keep up their lifestyle, especially when they are looking to make the best of their current situation.
It remains to be seen whether the figures for March reveal another dip in mortgage approvals, or whether February might turn out to be little more than a blip. Will that dip early in the year represent a clue to a more prolonged slide in the housing market, and if so, how long might that slide last? We shall be watching.