British banks approved the fewest new mortgages in December since April 2013, according to figures released by UK Finance. Only 36,115 home loans were approved by mortgage lenders, a drop of 19% on November’s home loan approval of 39,007. The figures are largely considered to be a result of an early rush, to push borrowing through before November’s base rate rise, coupled with the falling real-term wages. Chief UK economist at Pantheon Macroeconomics Samuel Tombs, said the latest data showed mortgage approvals “falling off a cliff”. According to Howard Archer, chief economic adviser to the EY ITEM Club, 2018 is likely to be a challenging year for the property market.
He said activity was “likely to be lacklustre as the squeeze on consumer purchasing power only gradually eases, confidence remains fragile and caution persists over engaging in major transactions”. However, traditionally December is a quieter month for new mortgages and this may not be a true reflection of the market. The reduction in stamp duty for first time buyers only took effect in November, and it is still too early to see the impact that will have on the market.
Whilst the current outlook indicates buyer caution and a slower market, the mortgage lenders are responding with continued low rates and attractive packages to entice new customers and first-time buyers. Skipton Building Society have launched a range of products for borrowers wanting to leave a Help to Buy mortgage, and Marks and Spencer’s launched a £1,000 cashback deal for first-time buyers, with a free valuation. Eric Leenders, managing director of personal finance at UK Finance, said: “December is traditionally a quieter month for mortgages, although the underlying trend of increased numbers of first time buyers, supported by government initiatives such as Help to Buy, continues”. On this basis, we should perhaps wait to see what the first quarter of 2018 brings?