The UK housing market has been significantly affected by the COVID-19 pandemic. One of the consequences has been a fall in the number of mortgage approvals, which has reached an all-time low. According to data from the Bank of England, mortgage approvals fell to 47,093 in December 2022, the lowest level since April 2020.
There are several factors behind this decline in mortgage approvals:
Economic uncertainty:
The COVID-19 pandemic has created economic uncertainty, with many people unsure about their job security and financial stability. This uncertainty has made people more cautious about taking on significant financial commitments, such as mortgages.
Supply constraints:
The supply of properties available for sale has been limited due to the pandemic, with many sellers reluctant to put their homes on the market. This lack of supply has pushed up prices, making it more difficult for potential buyers to secure a mortgage.
Rising interest rates:
Interest rates have started to rise, which has made mortgages more expensive for borrowers. This increase in the cost of borrowing has deterred some people from applying for mortgages.
Stricter lending criteria:
Lenders have become more cautious in their lending criteria, making it more difficult for some borrowers to secure a mortgage. This has been particularly challenging for first-time buyers or those with less-than-perfect credit scores.
While the fall in mortgage approvals may be concerning for some, particularly as a high number of UK landlords are selling their buy to let property, it is important to note that it does not necessarily reflect a decline in the overall health of the housing market. Many buyers are still active in the market, and there are signs that the market may be starting to recover.
For those looking to buy a property, there are several steps that can be taken to improve their chances of securing a mortgage:
Improve credit score: Lenders are likely to be more willing to lend to those with a good credit score, so taking steps to improve credit rating can be beneficial.
Save for a larger deposit: Lenders are more likely to approve mortgages for those with a larger deposit, so saving for a larger deposit can help to increase the chances of approval.
Seek professional advice: Seeking advice from a financial adviser or mortgage broker can help to identify the most suitable mortgage products and lenders.
Be flexible: Being open to a range of properties and locations can help to increase the chances of finding a property that meets both the buyer’s needs and budget.
In conclusion, the fall in UK mortgage approvals is a reflection of the economic uncertainty and supply constraints created by the COVID-19 pandemic, along with rising interest rates and stricter lending criteria. While the situation may be challenging for some buyers, there are steps that can be taken to improve the chances of securing a mortgage, such as improving credit scores and seeking professional advice. As the housing market continues to recover, it is likely that mortgage approvals will begin to rise again.