29 November 2022
If you are covering the latest Bank of England Money and Credit statistics, please see the following comment from Karen Noye, mortgage expert at Quilter:
“This morning’s Money and Credit statistics from the Bank of England once again show signs of a housing market on the brink of a significant dip, if not a crash. The latest figures reveal that mortgage approvals for house purchases fell to 59,000 in October, down from 66,000 in September.
“This latest fall suggests demand is beginning to come out of the market, and this may come at a time where more people are starting to consider putting their properties up for sale as a result of unaffordable mortgage and heating costs. As we move further into the winter and the temperature drops, increased energy bills alongside greatly increased mortgage payments may result in more and more people being unable to afford to stay in their current homes. If this is the case - and the level of demand continues to decrease - we will likely see a subsequent reduction in house prices and a switch from the seller’s market seen in recent years to a buyer’s market.
“The Bank of England’s base rate now sits at 3%, the highest rate seen for over three decades, and further rate rises are widely expected as inflation continues to grow. This jump in interest rates means those looking to remortgage or take their first step onto the property ladder will suffer considerably higher monthly costs than they would have done just a couple of months earlier. If rates continue to rise and push buying a first home out of reach for many, then demand in the housing market will likely see an even further dip as people hold off on buying in the current climate.
“The cost-of-living crisis is also putting significant stress on people’s finances outside of the housing market, illustrated by this morning’s data which shows an increase in the level of borrowing taking place. Individuals borrowed an additional £0.8 billion in consumer credit in October, up from September’s £0.6 billion. While this number remains well below August’s £1.2 billion, the uptick hints at a renewed reliance on credit as energy bills and other everyday costs continue to rise.
“Should borrowing continue to rise and more people start to load debt onto credit cards to help make ends meet, it could prove disastrous. The effective rate on interest bearing credit cards rose to 19.31% in October, up from 18.96% in September, meaning borrowers could rapidly find themselves spiralling into debt.”
