31 October 2022
If you are covering the Money and Credit statistics from the Bank of England, please see the following comment from Karen Noye, mortgage expert at Quilter:
"The signs that a housing price dip if not crash are starting to reveal themselves. The latest Money and Credit statistics from the Bank of England revealed that mortgage approvals for house purchases decreased significantly to 66,800 in September from 74,400 in August. If demand continues to come out of the market while people start to put their properties up for sale due to unaffordable mortgage or heating costs then we will see a natural reduction in price as it switches from a seller’s to a buyer’s market. Particularly as it starts to get colder, increased energy bills on top of eyewatering mortgages may make some homes simply unaffordable for people to stay in this winter.
"The ‘effective’ interest rate i.e. the actual interest rate paid, on newly drawn mortgages increased by 29 basis points to 2.84% in September and this is likely just the start of a new higher interest rate environment we are entering into. Later this week, the Bank of England will likely once again rachet interest rates up to try and tame inflation. However, as it does that those trying to remortgage or get onto the ladder will find that they will have to pay significantly more than what they would have just a month earlier. Only those who have fixed into a longer term mortgages deals in the last few months will not suffer increased costs.
"While the housing market looks like it is already groaning under the strain of the cost-of-living crisis fortunately the statistics show that while there was a significant amount of borrowing in August (£1.2 billion) individuals only borrowed an additional £0.7 billion in consumer credit in September, which is the lowest level since December 2021 (£0.3 billion).
"This is good news as if people start to load debt onto credit cards in the face of increased bills it could prove disastrous. This is laid bare by the fact the effective rate on interest bearing credit cards increased to 18.96% in September meaning borrowers using this type of credit could soon find themselves spiralling into debt."
