Storm clouds over interest rates begin to pile up – Property Industry Eye


Bank of England lending statistics for September show net mortgage borrowing was £ 4.8bn in September, up from £ 3.0bn in August.

Mortgage approvals for home purchases rose further to 91,500, the highest level since September 2007. Effective mortgage interest rates were broadly unchanged.

Net consumer credit borrowing weakened in September as households made net repayments of £ 0.6 billion. The interest rate on paid overdrafts rose an additional 3.5 percentage points to a new high of 22.52% in September, while rates on new consumer credit and new card loans of credit have changed little.

Private firms borrowed £ 0.7 billion on the capital markets in September. Small and medium-sized non-financial enterprises (SMEs) borrowed £ 1.6 billion, net, from banks, while large companies repaid £ 5.8 billion.
Overall, household and business deposits were strong in September, at 6.8 billion pounds and 2.5 billion pounds respectively. Deposit interest rates remain at historically low levels

As inflationary pressures begin to intensify, the prospect of higher interest rates becomes more likely. For a generation that has known only a world of extraordinarily cheap money, the change will come as a shock.

Official forecasters predict the biggest hikes in mortgage rates will be in 2023, with the Office for Budget Responsibility (OBR) saying inflation is expected to accelerate to 4% next year.

In response, he expects the bank rate to rise next year, and the following year, from its current record low of 0.1%.

The OBR indicates that the discount rate could reach 3.5% if inflation exceeds 5%.

Reactions to the numbers acknowledged that while mortgages rebounded at the end of the SDLT holiday, the prospect of higher interest rates is poised to become a big factor in the real estate market. And the affordability of mortgage payments in the face of rising cost of living figures is also likely to become a bigger factor in lending criteria.

Karthik Srivats, co-founder of mortgage lender Ahauz:

“While all the talk in September was about squeezing income and slowing economic growth, on the mortgage front, things picked up again.

“Mortgages have more than doubled from their August level to £ 9.5 billion, the highest monthly level since June’s record figures.

“It is likely that the surge in activity was fueled in part by a late wave of buyers desperate to complete their purchases before the end of the stamp duty holidays in England.

“Even if the total of new loans remains below the all-time high for the summer, market dynamics continue to push up average house prices and put additional pressure on first-time buyers who are trying to make the sums grow. .

“That said, interest rates remain very competitive and we expect approvals to stay well ahead of pre-pandemic levels for some time to come. The supply of homes for sale is not even not close to meeting buyer demand, the market is unlikely to cool significantly in the coming months.

“With the Governor of the Bank of England increasingly hinting that an interest rate hike is coming, it remains a difficult environment for first-time buyers.”

Anthony Codling, Twindig:

“Mortgage approvals in September 2021 were 2% lower than the previous month and 22% lower than a year ago, with mortgage activity starting to return to normal levels after the market closed. housing and the stamp duty holiday that followed.

“If we compare mortgage approvals since the start of the COVID-19 pandemic to their 10-year average, we saw a net gain of 175,000 mortgage approvals, a sure sign that the Stamp Duty Holiday has stimulated the activity of the housing market. “

Richard Pike, Sales and Marketing Director of Phoebus Software:

“In a week when the Chancellor almost chose to put housing aside in his budget speech, it is encouraging to see that the mortgage approval numbers in September were still above the level of ‘before the pandemic. Not that £ 24bn is an insignificant amount, it just didn’t deserve much importance in the grand scheme of things. However, for those of us in the industry, we need to take the positives while we can get them and, for now, our housing market continues to defy predictions that it will fall off a cliff afterwards. SDLT vacations.

“It is interesting to see that consumer borrowing has increased while savings, which had increased during the pandemic, declined slightly. As people return to “normal” practices, the difference between what people spend and what they save is likely to increase. Not surprising when you consider how long we went without these freedoms.

“Rising prices, especially for energy and fuel, will surely widen this gap even further in the coming months. Next, lenders will need to carefully consider affordability calculators and the risk that rising household bills has on overall affordability. “

Steve Seal, CEO, Bluestone Mortgages:

“It was reassuring to regain confidence in the real estate market after several months of uncertainty. However, with the recent end of the Stamp Duty leave and leave program, and [the] Fairly light budget on housing, we could see more borrowers plunge into difficult financial situations and, as a result, will likely be pushed back by the traditional mortgage market.

Conor Murphy, CEO, Smartr365:

“While buyers are no longer motivated by the tax savings offered by the stamp duty holiday, we can expect mortgage approvals and net mortgages to remain strong throughout the fourth quarter and 2022, given the persistent ‘space race’ and housing shortage in the UK. .

“However, with various factors putting pressure on an interest rate hike and the stamp duty holiday for a long time, now is the time to plan for the next market era.

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