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UK mortgage approvals slump after interest rate hikes

Mortgage  The red brick Victorian row houses of Muswell Hill with panoramic views across to the skyscrapers and financial district of the city of London.
Mortgage repayments soar amid rising interest rates. Photo: Getty (coldsnowstorm via Getty Images)

The number of mortgages being approved by UK lenders fell in April and borrowers repaid debt at a historic pace after soaring interest rates increased the cost of serving loans.

There were 48,690 new mortgages signed off in April, down from 51,488 in March, according to figures from the Bank of England. That’s the lowest since February.

Gross mortgage lending of £17bn in April was 25% lower than the average of the previous six months, highlighting the reduction in demand for loans as interest rates have risen.

The BoE also reported that homeowners made the biggest net repayment of mortgage debt on record – if you ignore the pandemic period.

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Read more: UK house prices fall as interest rate rises set to push mortgages higher

That suggests the rise in interest rates is encouraging borrowers to pay down their mortgages.

Households reduced overall mortgage debt by £1.4bn in April, the highest net repayment since records began in 1993 apart from one month during the COVID pandemic.

Many lenders, including the Nationwide, have already pulled fixed rate mortgage offers and replaced them with higher cost loans in response to the financial market moves

Thomas Pugh, economist at audit, tax and consulting firm RSM UK, said: ‘The fact that net mortgage lending turned negative in April, contracting by £1.4bn, the lowest level on record excluding the pandemic suggests house prices have further to fall.

Read more: Interest rates: UK house sales tumble as mortgage costs surge

“The small drop in mortgage approvals, partly reversing the rise in March, reinforces this message. Indeed, higher interest rates and falling real incomes will limit buyers ability to meet high prices. We expect a peak to trough fall in house prices of between 5% and 10%.”

Watch: Am I wasting my money by renting?

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