Mortgages Suffer Huge Drop in December

Many were expecting a drop in the number of home loans approved in December 2017. However, some were surprised at how big the drop was. The total approved by banks in the final month of the year was 36,115 – far lower than the 39,007 figure recorded the previous month. That amounts to 2,892 fewer mortgages approved by banks alone to close out the year.

Down 19% year on year

While many are preoccupied with the festive season instead of looking for mortgages, December’s figure confirmed a significant drop of 19% compared with the same month the previous year. The figures were confirmed by trade association UK Finance. The figure was also highlighted to be the lowest one seen since April 2013.

Tough times for those searching for mortgages

“The figure is not a huge surprise, although the scale of the drop is perhaps more significant than some had predicted,” said Darren Pescod, CEO of The Mortgage Broker Limited. “The rise in the Bank of England base rate in November no doubt forced some people to put their moving or remortgaging plans on hold. In real terms, wages have also taken a knock. It’s possible many have decided to adopt a ‘wait and see’ approach rather than applying for a mortgage in what appears to be increasingly uncertain times. The months ahead will help us gain a better picture of what is happening in the housing and mortgage markets.”

Is December quiet anyway?

It is, and that is something that ought to be remembered when considering the impact of the lower figures. The data from UK Finance is also collected only from banks on the high street. That means other mortgage providers won’t be included within the data. However, that is unlikely to make a significant difference regarding the overall trends seen here.

“We would expect to see a fall in numbers in December anyway,” Darren Pescod added. “Many people who want to apply for a mortgage will likely delay doing so until the festive period is over. That means January’s figures will be more important if we are to get a better idea of the overall state of the mortgage market at present. We’ll be looking at those closely.”

UK Finance did state the figures were seasonally adjusted, but the figure is still low compared to previous years. The months ahead will be of interest when assessing the overall trend as we go further into 2018. While the base rate rise by the Bank of England was expected, the suggestion that further rises are likely over the next two or three years may also have made people wary.

“Many people will have become used to low interest rates,” Darren Pescod pointed out. “However, even if we see further rises in the next few years, they are unlikely to be large ones. With other financial pressures also identified, not to mention a cooling housing market, it’s clear the months ahead could be challenging in many ways.”

Published on 23 July 2020

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