01 March 2023
If you are covering the latest Bank of England Money and Credit statistics, please see the following comment from Charlotte Nixon, mortgage expert at Quilter:
“The Bank of England’s Money and Credit statistics this morning paint a worrying picture of the nation’s finances. Mortgage approvals have continued their downward trajectory and have suffered their fifth consecutive monthly decrease. Not accounting for the period when Covid hit, we are now seeing approvals as low as they were in 2009 when the market was still reeling from the impact of the financial crisis.
“It is therefore no surprise that we have also seen from Nationwide today that house prices have started to drop too. With demand being sucked out the market by the cost-of-living crisis house prices are naturally going to start to come down just to make them more attractive to buyers spooked by high cost of living costs and mortgage costs. Net borrowing of mortgage debt by individuals also decreased from £3.1 billion in December to £2.5 billion in January.
“After the troubling days following the mini budget, mortgage rates have dropped faster than originally anticipated and therefore there is a chance that this will help encourage more people to market and therefore soften the landing for house prices. We may also see the number of mortgage approvals improve next month as people take advantage of lenders lowering prices to try and entice more people to market. However, despite it being technically the first day of spring we are still not through the cold months yet and people will be suffering with high energy costs alongside higher mortgage rates. This may make people think twice before opting to move home and suffer all the costs that go with that.
“Elsewhere the statistics show that unfortunately people are now also turning to credit more and more. Individuals borrowed an additional £1.6 billion in consumer credit in January, on net, which was the highest net borrowing by individuals since June 2022 (£1.7 billion). Much of this was borrowed via the use of credit card which particularly in this kind of higher interest rate environment will potentially leave people paying eyewatering interest on their loans.
“With the peak of inflation hopefully now in the rear-view mirror we should hopefully start to see the market improve as the pace of interest rate increases slows and we start to move out of this current environment.”
