Mortgage Approvals At Lowest Levels For Two Years

January 6, 2023

New mortgage approvals in the UK have fallen to the lowest levels since June 2020, according to the latest figures from the Bank of England. The Financial Times reports that data shows that 46,100 approvals were made in November, down from 57,900 in October. This is the expected consequence of the market turmoil of recent months.

After the surprise mini-budget at the end of September under Liz Truss’s brief leadership, thousands of products were withdrawn from the market and mortgage interest rates soared to highs of over 6.6%. Meanwhile, the rising cost of living has seen a sharp jump in credit card borrowing, from £400m in October to £1.2bn in November.

The tough economic climate means that more potential borrowers are expected to see their applications declined over the next 12 months. This can bring an extra dimension of stress and worry, particularly at a time when rental properties are also in short supply and average rents are soaring.

It is thought that about 17% of all adults in the UK have adverse credit records, meaning that they have an issue with their past financial track record. This could be because of missed or late payments, have been served a County Court Judgement (CCJ) or have a Debt Management Plan (DMP) or Individual Voluntary Agreement (IVA).

As more people are resorting to credit cards and loans just to cover their basic day to day living costs, it is expected that the number of people with bad credit records will rise during 2023. Lenders are also likely to become stricter in their requirements for new borrowers, in order to protect themselves from the risk of defaults.

Any adverse credit incidents stay on an applicant’s credit file for six years. Some lenders have more flexible attitudes than others towards imperfect credit scores, and will assess each individual on a case-by-case basis. For example, a missed payment on a phone contract may be considered less serious than a missed mortgage payment.

Some specialist lenders will also consider applicants with more serious incidents on their record, including defaults, CCJs, DMPs, and even bankruptcies, although usually only when the individual has been discharged from the bankruptcy for at least 12 months. Anyone in this situation is advised to contact a bad credit mortgage brokers for tailored advice.

Despite the gloomy economic outlook for 2023, the housing market is not expected to crash to the extent that it did during the financial crisis of 2008/9. Interest rates rises are also expected to ease off or even drop as the economy adjusts to the shock of the war in Ukraine, and recovers further from the effects of the pandemic.

House prices are expected to fall, but this is broadly seen as a rebalancing of the artificially inflated prices seen during the pandemic, when the stamp duty holiday and the ‘race for space’ fuelled unprecedented levels of demand.

Your home may be repossessed if you do not keep up with your mortgage repayments

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