According to the most recent report from the Bank of England on 29th November, mortgage approval numbers have dropped by 11% in October. This brings the number to its lowest level since the middle of the pandemic in June 2020. These October figures reflect the impact of the September “mini” Budget issued by Kwasi Kwarteng as part of former prime minister Liz Truss’ cabinet, which had a dramatic impact on financial markets. It led to a sharp rise in interest rates for mortgages as well as many mortgage deals being withdrawn in the immediate aftermath of the Budget.
First-time buyers’ opportunity
Many Ascot solicitors and those elsewhere working in property and conveyancing felt the impact of these changes too. Although mortgage approvals rate fell, the Financial Times notes this also had a knock-on effect for property prices that has led to many homeowners accepting below their initial asking price and creating a window of opportunity for first-time buyers to get on the property ladder. This surge in demand will have potentially contributed to delays in conveyancing processes already held back by high transaction levels since the pandemic boom in property markets.
With markets stabilising following the Autumn Statement, mortgage lenders have been able to slowly begin lowering their exceptionally high rates, with average five-year fixed rates falling below 6% for the first time in two months. This further increases the opportunity for buyers to access mortgage deals after the sudden drop precipitated by unusually high interest rates. Solicitors such as Parachute Law expect to see an increase in demand for property-related services after Christmas once lower rates and potentially reduced prices create a window of opportunity.
Housing sales continue to fall
Despite these signs of potential opportunity, overall housing sales have continued to fall in the past month at rates of up to 50% in previous hotspot areas. Many find themselves unable to pass the assessments for mortgages based on their current earnings and are opting to wait before acting on potential purchases. This is likely a combination of the market unease created by rising interest rates of the “mini” Budget as well as a regular dip in sales seen by many firms during the Christmas period as prospective buyers choose to reprioritise their finances and wait for the above-mentioned windows of opportunity to widen in the new year
Remortgaging increasing
Alongside an overall drop in housing sales over the past month, there has also been an increase in remortgaging enquiries as many look to try and free up additional funds as well as cover costs in a difficult economic climate. Many firms expect this to continue rising into the new year as recession conditions begin to set in.
Such figures are reflective of a fluctuating property market that has seen out-of-the-ordinary trends create higher than average levels of uncertainty. This being said, the more recent Autumn Budget highlights a longer-term outlook focused on tackling recession conditions which is predicted to stabilise recent volatility. As discussed above, this may create opportunities for more achievable prices for first-time buyers, in addition to an easing of abnormally high rates in the coming year. For many solicitors, this will also bring some welcome stability to the volume of property transaction enquiries that have been so volatile in the face of fast-moving conditions.