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Mortgage approvals drop – what does this mean for the housing market?

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The number of mortgage approvals has fallen to a seven-month low, but what does this mean for the housing market?

According to UK Finance, mortgage lenders approved 37,352 loans for house purchases in September, down from 42,581 in August. It’s the lowest number of approvals since February this year.

Why have mortgage approvals dropped?

With the cost of mortgages on the rise following the Bank of England’s increase in base rate this autumn, and continued uncertainty as the Brexit deadline looms, consumer confidence in the property market has been slowly waning. Coupled with the tax implications of buy-to-let mortgages then the impact on the housing marketing is significant.

Many potential movers may well be taking the ‘wait and see’ approach.  This has meant the market is a little more subdued than usual. However, if people are waiting to see if property prices fall even further post-Brexit, then they may be disappointed.

Following the 2008 crash, many people waited to buy property expecting to see house prices fall dramatically.  As we know this didn’t happen quite as people predicted.  In fact many who waited were caught out when prices actually began to rise at a rapid rate.

The advice from experts to current buyers would be to continue as normal and try to put any potential impact of Brexit to the back of their mind.  Particularly if they feel that they will still have job security in the future.

Is now the time for first-time buyers?

Current figures actually seem to show that first-time buyers in particular are doing just that.

Whilst overall mortgage approvals may have dropped, the largest share of the housing market has been taken by first-time buyers – with mortgage approvals for new homeowners actually showing an increase month on month.

It appears that more young buyers are being helped onto the property ladder due to house prices slowing across much of the country – even the property boom in London seems to be slowing down. Last month, the average UK house price was £214,534, down from £214,922 in September.

Lower prices mean that first-time buyers can achieve their ambition of home ownership much sooner than they may have expected.

The slow down in mortgage approvals for buy-to-let properties is also helping first-time buyers. Historically, first-time buyers have had to compete against cash-rich landlords and property developers monopolising the market for affordable, 1 and 2 bedroom homes however with landlords facing new tax penalties brought in by the government, this has opened up more opportunities for first-time buyers to step onto the property ladder.

Are there any good mortgage deals for first-time buyers?

There is also good news in terms of mortgage deals for first-time buyers. The expectation of large deposits has been almost prohibitive for a huge section of the buying population, however this is becoming easier with the number of 90% and 95% mortgages increasing significantly.
In September, Moneyfacts announced that the interest rates for 95% mortgages on 2 yr and 5 yr fixes were at the lowest level since records began.

If you’re thinking of buying your first home, a mortgage broker can help you find the right deal for you.

Speak to SoSmart Money today to discuss your options.

The above post does not constitute advice – financial, legal or otherwise. The information within this article is the author’s own opinion and do not necessarily reflect the views of SO Media or So Smart Money.


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