Mortgage approvals plunged almost 10% in July as affordability challenges continue for potential house buyers.

This is according to the latest BoE Money & Credit data which shows that net mortgage approvals decreased from 54,600 in June to 49,400 in July, while approvals for remortgaging slightly increased from 39,100 to 39,300 during the same period.

Net borrowing of mortgage debt by individuals increased for the third consecutive month to £0.2bn in July, from £0.1bn in June.

The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages rose by a further 3 basis points, to 4.66% in July.

MT Finance director Tomer Aboody says lower mortgage approvals in July are disappointing, indicating that there is less confidence in the housing market than seemed to be the case as recently as the previous month.

“Interestingly, the fall in borrowing through other forms of consumer credit including car dealership and personal loans, while borrowing on credit cards remained unchanged, suggests people are being cautious, retrenching and waiting to see what happens with inflation and interest rates.

‘With transactions down compared with where we were before the pandemic, some assistance from the government in order to boost the market and encourage a pick-up in volumes is now required.”

Quilter mortgage expert Charlotte Nixon comments: “The recent money and credit statistics from the Bank of England illustrate a housing market that shows signs of deceleration amidst what is traditionally an active summer period. The rise in net borrowing of mortgage debt by individuals for the third consecutive month is marginal at best, reflecting a cautionary approach to new mortgage commitments.

“A decrease in mortgage approvals and only a slight uptick in remortgaging activity in July further underscores this cautious sentiment.

Nixon points out that while the ‘effective’ interest rate on newly drawn mortgages experienced only a modest increase, the broader implications for the housing market are clear.

“The Bank of England may be poised to adjust rates again in its next meeting. Amidst inflationary pressures, the prospect of additional rate hikes later this year cannot be entirely dismissed. The intricate dance of interest rates undeniably casts its shadow over property transactions, which will feed through to house prices”.

Sirius Property Finance managing director Nicholas Christofi believes it is important to remember that there is a seasonal element at play during the summer holiday period and this could be a contributing factor behind a reduction in market activity.

“So it will be interesting to see where we stand over the coming months, as we approach what is traditionally a busy time of year in the run up to Christmas.”