New property market research shows that since the Bank of England started increasing rates in 2021, the number of mortgage lending transactions has fallen by 7.1% compared to the prior period. In addition, the total number of mortgage lending transactions in February 2023 was the lowest since May 2020.

The past three years have been somewhat of a rollercoaster for the UK property market. After years of steady growth, the onset of the pandemic caused prices to spike, reaching record levels in many regions, much to the bemusement of experts who were predicting the polar opposite.

However, rising interest rates, a high cost of living and economic uncertainty during the past year have seen prices retreat, and leading economists feel that this will be difficult to reverse this trend in the shorter term. In fact, UK Finance has stated that it expects overall mortgage lending to fall by 15 per cent in 2023 to pre-pandemic levels and has predicted property transactions will fall by 21 per cent.

As we’ve written many times, the property market is a vital component of the UK economy, and the reason is obvious; as property prices rise, homeowners feel wealthier and are inclined to spend more. However, for prices to rise, properties need to sell, and if mortgage lending continues to fall, even cash buyers will not be able to come to the market’s rescue.

What the new research reveals
Octane Capital analysed the number of UK mortgage lending transactions in the 15 months since the Bank of England began raising interest rates (December 2021 to February 2023) and compared it to the 15 months prior. It found that mortgage lending transactions have fallen by -7.1% since the start of the interest rate hikes.

In addition, the data shows a 19.5% decline in transactions that required funding from specialist lenders, and mortgage lending from mainstream monetary financial institutions has fallen by 5.9% over the same period.

You can view the data table and sources online here.

Jonathan Samuels, the CEO of Octane Capital, commented that the Bank of England’s aggressive policy to curb inflation meant it was only a matter of time before it would notably impact mortgage lending transactions and the economic chaos that ensued following the mini-budget in September 2022 was not helpful.

He added, “The broad feeling across the industry is that 2023 is likely to bring greater certainty and stability, which should help stabilise the market. However, an eleventh consecutive increase so early in the year is unlikely to fill the nation’s homebuyers with confidence, and so it could be some months yet before we see this negative trend start to reverse fully.”

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