Mortgage approvals saw a surprise fall in November after Rachel Reeves’s Budget resulted in higher borrowing rates, Bank of England figures showed yesterday.
The number of home loans approved by lenders dropped to 65,720, a three-month low – down from 68,129 in October – after the Chancellor’s announcement. Economists had expected the figure to rise slightly to 68,500.
Housebuilders’ shares fell after the data was published, with FTSE 100 firms Persimmon down 3.8 per cent, Barratt Redrow falling 3.2 per cent and Taylor Wimpey off by 3.4 per cent.
The fall in mortgage approvals came after the Budget on October 30, which included policies that are expected to add to inflation pressures. That is likely to make the Bank of England cautious about cutting rates. And lenders have responded by increasing the rates on fixed-term mortgage deals.
Nathan Emerson, chief executive of property professionals’ body Propertymark, said: ‘The impact of higher interest rates without doubt has had a profound impact across the housing market.
‘Consumers need to feel a degree of confidence within their financial position to approach the buying and selling process.’
Struggle: The fall in mortgage approvals came after the Budget on October 30, which included policies that are expected to add to inflation pressures
Matt Swannell, chief economic adviser to the EY ITEM Club, said high rates on swaps – financial products used by lenders to price home loans – meant that mortgage rates were ‘likely to stay high’.
However, other figures this week suggest the housing market remains robust.
Lender Nationwide said prices rose by 4.7 per cent over 2024, the strongest year since 2021. Activity is expected to heat up in the early months of this year as buyers race to complete purchases before a stamp duty holiday comes to an end.
The ‘nil’ rate threshold on the tax for first-time buyers stands at £425,000 but will fall back to £300,000 from April. Nationwide predicts a period of weakness for the market after that deadline passes and that house price growth will slow to a more moderate 2 to 4 per cent over 2025.
Yesterday’s Bank of England data also added to signs of a slowdown in the wider economy. Consumer credit – which includes credit card and home loans – grew by just 6.6 per cent in November, the slowest pace since June 2022.
Recent figures showed that the economy stagnated in the third quarter of 2024 and the Bank of England has estimated that it also saw zero growth in the final three months of the year.
Elias Hilmer, economist at consultancy Capital Economics, said the latest data ‘suggests that households’ caution with their borrowing and saving ahead of the Budget hasn’t gone away’.
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