Octane Capital have analysed approval data from the Bank of England, and they believe the demand for homes in the country has reached a ceiling level. Their analysis shows there was close to 1.6 million mortgage approvals in 2021/22. This represented a 10% increase on the previous financial year.
57% of these approvals were for a home purchase, equating to 894,393 homes. This sounds a lot, a and it is impressive, but it is only an increase of 1% compared to the previous financial year. Of course, the past few years have been challenging.
Also, the impact of the stamp duty holiday significantly affected demand and movement, so a fall in house moves isn’t as catastrophic as it might seem at first glance.
In 2020/21, there were 884,482 mortgages approved. There was an 11% increase on the 2019/20 year, but again, the timing of the financial year and the start of the pandemic affects these figures.
These have been challenging times in housing market
The housing market practically shut down in March 2020, and this lasted for a few months. Of course, from the summer of 2020, with the stamp duty holiday in place, mortgage applications and approvals skyrocketed.
Jonathan Samuels is the chief executive of Octane Capital, and he spoke about the latest interest rate increase, and what this will likely mean in the housing market. He suggests that mortgage approvals will likely fall.
He said: “The level of buyers being approved for a mortgage on a house purchase has continued to climb year on year and remains incredibly high. In this sense, the property market is still running extremely hot, although it certainly seems to have hit the ceiling with the volume of mortgage approvals for house purchases climbing by just one percent versus the previous year.”
Jonathan Samuels also said; “A hattrick of base rate increases towards the end of the last financial year will have no doubt contributed to this reduction in buyer appetites and, in contrast, we’ve seen a sharp uplift in those remortgaging to secure better rates ahead of any further interest rate hikes. With a fourth increase coming so soon in this financial year, there’s a very good chance that the market will now start to deflate, bringing property values back down to earth and returning the market to a state of pre-pandemic normality.”
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If it becomes harder for many people to arrange a mortgage, it makes sense this will dampen demand for homes. After all, if you cannot afford to buy a home, you aren’t going to be active in the market.
With the demand for homes currently outstripping the supply of homes by a significant amount, this is likely to have an impact on the housing market.
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