Individual mortgage debt is lowest on record excluding pandemic
Individuals’ mortgage borrowing has reached the lowest level on record, excluding the pandemic, new Bank of England data has shown.
Mortgage borrowing continued to decline from net zero in March to £1.4bn of net repayments in April, the Bank said, adding: “This is the lowest level on record, if the period since the onset of the Covid-19 pandemic is excluded.”
Meanwhile, net mortgage approvals for house purchases fell from 51,500 in March to 48,700 in April. Approvals for remortgaging increased slightly from 32,200 to 32,500 during the same period.
“The latest money and credit figures point to further signs that we have become more cautious in response to the rising cost of borrowing as part of an ongoing battle to combat stubbornly high inflation,” said Myron Jobson, senior personal finance analyst at Interactive Investor.
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“Excluding the period since the onset of the Covid-19 pandemic, mortgage borrowing has plunged to the lowest level since records began as high mortgage rates, in tandem with high house prices and a higher cost of living, has made ownership uneconomical for many would-be buyers.”
The Bank of England base rate now stands at 4.5 per cent after a series of rate hikes designed to tame high inflation, with more monetary tightening on the horizon.
Jobson stated that concerns over high interest rates has “resulted in the withdrawal of seven per cent of mortgages from the market since last week, and an increase in average rates on two- and five-year fixed deals.”
However, Jason Ferrando, founder and chief executive of peer-to-peer property lender easyMoney, is still bullish about the property market. He said while there has been a monthly reduction, with the exception of last month, April’s total is the strongest performance seen in the last six months.
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“We’ve seen strong signs that the spring surge in market activity is well and truly underway, with mortgage approvals climbing quite considerably since the start of the year,” Jason said.
“Of course, the threat of yet another interest rate hike this month could prove problematic, with the ever escalating cost of borrowing already proving a sizeable hurdle and one that is causing buyers to tread more tentatively.”
The Bank’s data also showed that net borrowing on consumer credit by individuals in April was broadly unchanged when compared to March, at £1.6bn, and during April, households deposited an additional £3.6bn with banks and building societies, following net withdrawals of £3bn in March.
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