Mortgage market cools, but we’re not set for a deep freeze: Bank of England figures

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, comments on the Bank of England mortgage statistics, showing mortgage market cooling, but we’re not set for a deep freeze.

Key points from publication:

• We borrowed £73.4 billion in mortgages between July and September – down £15.6 billion from the previous quarter (when the stamp duty holiday was more generous) but up 17.4% from a year earlier.
• The value of mortgages agreed for the coming months fell 8.2% in a quarter, but was similar to a year earlier – at £78.9 billion.
• 9% of mortgages were remortgages, up from 16.5% the previous quarter. This is the first rise since the first three months of the pandemic, and takes us to similar levels seen a year earlier.

Sarah Coles says:

“The mortgage market is cooling, but there’s nothing to chill the blood in these figures.

“The temperature dropped in the mortgage market this autumn, after the stamp duty holiday became decidedly less generous. Mortgages agreed for the winter fell too. However, they were dropping back from unusually high levels, which kicked in during the heat of the stamp duty holiday this summer, so a drop was always expected. And although mortgages agreed for the coming months fell, they remained at a similar level as the same period in 2020.

“We also saw the rise of remortgaging as a percentage of all mortgages, for the first time since the first three months of the pandemic. Much of this will be simply a function of the drop in the number of mortgages for new homes. However, during this period, inflation rose above its 2% target, and while we didn’t see rampant interest rate speculation until a little later, there were early stirrings of unease, which may well have convinced homeowners that now was the time to lock in a low rate.

“We can expect the mortgage market to grow colder this winter, and demand to drop further, as a result of the combination of the final end date for the stamp duty holiday, and the usual seasonal slowdown. However, it’s not going to freeze over. We can expect remortgage numbers to climb, and mortgages for purchases to hold up reasonably well. Despite some recent rises, mortgage rates are still incredibly low, and with lockdown savings burning a hole in some people’s pockets, there are still compelling reasons to buy.

“House prices should remain robust too. A Bank of England study out yesterday revealed that just under half of house price rises during the pandemic was driven by the race for space – including the demand for bigger properties, homes outside London, and the premium on houses rather than flats of the same size. Mortgage rates and lockdown savings also fed into the figures, so while the stamp duty holiday played a major role, removing it isn’t going to send prices plummeting.”

Kindly shared by Hargreaves Lansdown

Main photo courtesy of Pixabay