Mortgages bounce back: Bank of England

Mortgage approvals for new purchases rebounded to 74,300 – up from 63,700 in July. It reverses a downward trend we’ve seen for several months. The effective interest rate on mortgages rose 22 basis points to 2.55%.

We saved another £3.2 billion plus £1.1 billion in NS&I. Overall savings remained roughly the same as July (£4.3 billion and below the pre-pandemic average of £5.5 billion), but NS&I got a bigger share of it – up  from £0.3 billion in July. Less of this savings was in fixed rate accounts than in July – at £0.8 billion – down from £2.9 billion.

The Bank of England reported on effective interest rates for August: Effective interest rates – August 2022 | Bank of England

It also issued its money and credit report for August: Money and Credit – August 2022 | Bank of England

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown said: “This could be a last hurrah for mortgage approvals for new buyers. August saw a big bounce back after months of decline, taking us to the heady levels we last saw in January this year. Buyers were holding up despite everything the market was throwing at them, but the latest twist in the mortgage tale could change the narrative dramatically.

The surge in August may owe a great deal to buyers who decided it was ‘now or never’ for a house purchase. If they wanted to buy, and get in before Christmas, they needed to secure a mortgage before rates rose again. They may be relieved they did so before chaos hit the mortgage market in September.

However, the movements in the market this week may mean this is the last boom in mortgage approvals for purchases for a while. At the moment, 40% of mortgages have been withdrawn from sale, and when they come back, rates will be much higher. Given how house prices have risen, and how much bills have soared, when all this is factored into mortgage affordability calculations, it could make it far harder to secure a mortgage.

Already, Nationwide figures out today show price rises stalled in September. If this is the beginning of a bigger slowdown, it may well mean that this is the last boom in mortgage approvals for house purchases for some time to come.”