Mortgage approvals fall as costs of living rise

The Bank of England released mortgage approval data for April this week

What the Bank of England said

Mortgage approvals for April 2022 were 65,974

This was 5.1% lower than the 69,531 mortgages approved in March 2022

This was 23.0% lower than the 85,715 mortgages approved during April 2021

Twindig take

Mortgage approvals have now fallen for three months in a row. We view mortgage approvals as the bell weather of the UK housing market. Mortgage approvals are also the best lead indicator for the UK housing market, in our view. A mortgage approval today typically leads to a housing transaction in three to four months' time. Mortgage approvals, therefore, provide an accurate 'look ahead' to what is coming for the UK housing market.

April 2022 was the first time since June 2020 that mortgage approvals have been below their 10-year average. We are not calling the top of the housing market just yet, but it does seem that increasing costs of living and rising mortgage rates have taken some of the heat out of the UK housing market. There still is wind in its sails, just not as much as there was.

There is still a shortage of homes currently for sale, but if mortgage approvals continue to nudge down the demand / supply imbalance will soften and the rate of house price growth will begin to soften in our view. House price growth has continued to exceed our expectations, especially given what has been happening in the wider economy and we might be returning to a more normal pattern of house price growth in the near future.