With the world still reeling from the impact of COVID-19, it’s no secret that many industries have suffered. One sector that has been hit particularly hard is the housing market in the UK. Despite a significant uptick in demand for property since lockdown restrictions eased, mortgage approvals are still lagging behind pre-pandemic levels. In this blog post, we will explore some of the reasons why and what can be done to get things back on track. So whether you’re a prospective homebuyer or simply interested in keeping up with current events, read on to find out more!
The UK Mortgage Market
The UK mortgage market has been struggling to catch up with pre- pandemic levels for some time now. This is due to a number of factors, including stricter lending criteria, slower wage growth and increased demand for property in other countries. However, there are some indications that the market may be starting to turn around.
According to The Times, application volumes have increased by 5% over the past six months, and approvals have also climbed by 1%. This is likely due to the fact that lenders are becoming more relaxed about borrowers’ ability to repay their mortgages. Additionally, competition from abroad is driving up prices and making it harder for people to buy homes.
However, despite these positive signs, the UK mortgage market still faces significant challenges. Some of these include high rates of unemployment and low wage growth, which make it difficult for people to afford a home on their own terms. Additionally, there is a shortage of affordable housing units available in the UK. This could limit the amount of people who can access mortgages in the future.
Pre-Pandemic Approvals
Mortgage approvals in the UK are still below pre-pandemic levels, despite house prices reaching all-time highs. Some economists attribute this to tighter lending criteria and a decrease in demand for mortgages. Additionally, the government has invested in affordable housing schemes which could be contributing to the slowdown in approvals.
The Current State of the Mortgage Market
The mortgage market in the United Kingdom continues to lag behind pre-Pandemic levels, with approvals dropping to their lowest level since 2007. According to figures released by the Council of Mortgage Lenders (CML), there were just under 260,000 mortgages approved in Britain in 2016, a decrease of 5% compared to 2015 and a 17% decline from 2007. The CML blames low demand for properties and an increase in interest rates as the main reasons for the slowdown.
Despite these challenges, the CML does not believe that the market has reached a ‘tipping point’, and expects approvals to rebound in 2017 as more people come onto the housing market. Nevertheless, the low level of approvals shows that there is still a lot of work to be done before Britain returns to its pre-Pandemic peak.
What Lies Behind the Low UK Mortgage Approvals?
According to the latest figures from the Bank of England, only 47 percent of new mortgages approved in the UK in January 2017 were at pre-recession levels. The figure is down from 54 percent in December 2016 and falls well behind the levels seen before the global financial crisis. The low approval rates may be indicative of several factors, including a tighter lending criteria and a lack of affordability for some borrowers.
One reason for the stricter lending criteria could be that banks are wary of increasing their exposure to risk after Brexit. This reluctance to lend could be compounded by low interest rates, which have made it more difficult for mortgage providers to make a profit. Additionally, there is evidence that many people are still struggling to get on to the property ladder due to high housing prices and tight rental availability. This has created an increasingly competitive market, which has caused some borrowers to give up on applying for a mortgage altogether.
The situation is likely to get worse before it gets better. According to analysts at Deutsche Bank, house prices will continue rising for the next two years unless there is a significant upturn in economic activity or Brexit negotiations result in stricter controls on immigration. This could lead to even fewer people being able to afford a mortgage and increased demand for rental properties, which would further drive up prices.
Conclusion
Despite recent improvements, UK mortgage approvals remain well below pre- pandemic levels. This suggests that there are still many challenges to overcome in order to bring the UK housing market back up to speed. Some of these challenges may include a lack of available properties and high demand from buyers, which is likely due to the low rate of inflation and increasing wages. However, with patience and continued effort by lenders and government officials, it seems that the UK housing market will eventually recover.
