The latest Bank of England Money and Credit statistics released today show net mortgage approvals for house purchases fell from 49,500 in July to 45,400 in August, the lowest level in six months.

Net approvals for remortgaging dropped from 39,300 to 25,000 during the same period, the lowest since July 2012.

The ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages saw a 16 basis point increase and now sits at 4.82%.

Net borrowing of mortgage debt by individuals saw an increase from £0.2 billion in July to £1.2bn in August.

This was the fourth consecutive monthly increase in mortgage borrowing and the highest since January 2023. Gross lending rose from £19.1bn in July to £19.7b in August, while gross repayments were little changed at £18.9 billion in August.

Net approvals (that is, approvals net of cancellations) for house purchases, which is an indicator of future borrowing, fell from 49,500 in July to 45,400 in August, the lowest level in six months.

Net approvals for remortgaging (which only capture remortgaging with a different lender) saw a significant decline from 39,300 in July to 25,000 in August, the lowest since July 2012 (24,400).

Commenting on the latest figures Bestinvest personal finance analyst Alice Haine said:  “Mortgage approvals plunged 8% in August, as high mortgage rates caused major affordability challenges for buyers. Net approvals for remortgaging, which capture remortgaging with a different lender, also saw a significant decline as more homeowners stuck with their existing lender rather than switch to a new provider to avoid affordability checks”.

She adds: “While mortgage lending edged up for the fourth consecutive month, the decline in mortgage approvals – a forward-looking indicator – signalled that mortgage lending is likely to remain weak in the final months of this year as cost-of-living pressures and high borrowing costs make it harder for buyers to secure the homes they want. However, there is a hint of optimism in the air with estate agents reporting a rise in enquiries”.

Phoebus Software chief revenue officer Adam Oldfield, says that with two sets of figures out this morning (BoE and HMRC) it’s interesting to see that the Bank of England’s figures show that both house purchase and remortgage numbers fell dramatically from July to August.  Whereas the non-seasonally adjusted estimate for residential property transactions, from HMRC, in August shows an increase in activity.

“This volatility is indicative of everything we are seeing from lenders as they continue to reduce mortgage rates even as the Bank of England hold rates at their highest level for 22 years.

“We may well see a flurry of activity in October if would-be house hunters are tempted by reduced mortgage rates.  However, we may not have seen the last of the base rate rises in 2023.  All in all, we are looking at a pretty unsettled market and that picture is unlikely to change in the near future”.

“Add to this the increase in the number of arrears and lenders are heading into even more troubled waters.  The Mortgage Charter and Consumer Duty have put a huge onus of responsibility on lenders and now is the time to ensure that all systems are in place”.

“This will allow other resources to be allocated where they are really needed to ensure exposed borrowers are given the help they need,” he concludes.