"Lenders have been returning with more attractive fixed-rate mortgages as Swap rates have settled, albeit at a higher level than in the recent past."
Mortgage approvals for house purchases decreased to 46,100 in November, down from 57,900 in October to the lowest level since June 2020, according to the latest Money and Credit statistics from the Bank of England.
Approvals for remortgaging with a different lender fell to 32,500 in November from 51,300 in October, and were below the previous six-month average of 48,100.
Falling approvals came as the average interest rate paid on newly drawn mortgages increased by 26 basis points to 3.35% in November.
Gross mortgage lending decreased from £27.7 billion in October to £25.7 billion in November, while gross repayments dropped from £25.8 billion to £21.6 billion.
Mark Harris, chief executive of mortgage broker SPF Private Clients, commented: "As expected, the average rate paid on new mortgages rose significantly, increasing by 26 basis points to 3.35 per cent in November. As borrowers will be all too aware, this came on the back of a significant increase in the average rate paid in both September and October.
"Thankfully, the situation has eased for borrowers since the worst of the fallout from the mini-Budget. Lenders have been returning with more attractive fixed-rate mortgages as Swap rates have settled, albeit at a higher level than in the recent past. We expect this to continue into the new year as lenders compete for business and try to attract new customers."
Gareth Lewis, commercial director of MT Finance, said: "These figures clearly show the squeeze consumers are facing. Purchase approvals are down, showing that many people stopped and took stock in November as rates continued rising, wondering how high they were going to go and whether they could afford the purchase they were considering. Those who aren’t forced into a move may well be wondering whether they should put that purchase on hold for now and wait until the outlook becomes clearer.
"The increase in credit card debt reinforces this as the cost-of-living has increased alongside interest rates. It will be interesting to see what happens in coming months as we all have to go through a re-education pattern. This interest rate environment is sensible, not high, and where it should have been a lot sooner. The benign interest rate environment we have got so used to wasn’t sustainable.
"It’s not all doom and gloom – once people get their heads around the true cost of getting onto, or moving up, the property ladder and inflation starts to stabilise, buyers will appreciate their true affordability and better understand what they can commit to."
Jeremy Leaf, north London estate agent and former RICS residential chairman, added: "Mortgage approvals are always a good indicator of future direction of travel for the housing market. On the ground over the past few months, we have been seeing buyers trying to take advantage of mortgages arranged at lower rates, while others try to come to terms with higher repayments, as evidenced in this survey.
"However, we have noticed many holding back until the early new year to check if mortgage rates really are stabilising before deciding to move. The equity-driven are certainly faring better than more-heavily mortgaged first-time buyers, who are also being squeezed by higher rents."
