Mortgage approvals fall for fifth month in a row

The Bank of England released mortgage approval data for June this morning

What the Bank of England said

Mortgage approvals for June 2022 were 63,726

This was 3.0% lower than the 65,681 mortgages approved in May 2022

This was 21.0% lower than the 80,635 mortgages approved during June 2021

Twindig take

In June mortgage approvals fell for the fifth month in a row to 63,726 down 13% from the 73,220 approvals we saw in January. 

Mortgage approvals are the most important lead indicator for the UK housing market, in our view, and with a run of five reductions in mortgage approval activity, it is probably fair to say that the UK housing market is softening. We choose our words carefully, we are not seeing a 'crash', but we have now had five consecutive months of low to mid-single digit falls in mortgage approvals and they are now slightly below the 10-year average of 66,555.

It seems to us that we are currently on a glide path to a more normal level of housing market activity following a frenetic two-year period punctuated by working from home, races for space and stamp duty holidays. 

The cost of living and rising interest rates will no doubt be playing on homebuyers' and home movers' minds, but as we reported in our report 'What does the cost of living crisis mean for house prices?' those in a position to move are currently shielded from the cost of living crisis by savings and high levels of discretionary spending, both of which could be diverted to housing.

We suspect that the current softening reflects the fact that around 50% of moves are discretionary and some are taking a wait-and-see approach in the face of continued economic uncertainty and rising costs. 

In summary, housing activity levels falling, but returning to a more normal market rather than falling out of bed.