What do Low Mortgage Approvals Mean for First Time Buyers?
If you are preparing to buy your first home, you have probably already done a bit of research and realized that mortgage approvals are low at this time. In fact, you might have found that they were declining from as far back as 2009. Having discovered this, you may now be wondering what this means for those who are purchasing their first home.
Mortgage Approvals Decline
Mortgage approvals in the UK have been on the decline for the last few years. From as early as 2009 approvals slowed as the economy reeled from the recession that started in 2008. And then more recently, triggered by economic uncertainty, lenders withdrew mortgage products from the market, leaving buyers with fewer options. This resulted in a slower approvals process for the average mortgage application. Data from the Bank of England revealed that November 2022 saw 46,200 approved mortgages. In December 2022, that number fell to 35,600, a low not recorded since the start of the COVID19 pandemic.
What This Means for First Time Buyers
First time property buyers will be impacted by the decline in mortgage approvals as it increases the likelihood of their first mortgage costs being higher than anticipated. When fewer lenders are active, customers have reduced options and may have to settle for mortgage deals that are not competitive. In fact, the interest rates on new mortgages in the UK have been climbing in the last few months. It also means that their odds of getting their mortgages approved are lower. If fewer mortgages are being approved it likely means that successful applicants will need to meet more stringent or lofty requirements.
More Affordable Properties
But on a more positive note, this decline in mortgage approvals also spells good news for both first time home buyers and cash house buyers who may have been daunted by the price increases that occurred during the pandemic. Those increases may have put property acquisition just out of reach for some buyers. Now with fewer mortgages being approved and the economy struggling with a cost of living crisis, the demand for houses has declined, which means first time home buyers may be able to get lower prices for their homes. Real estate experts are predicting a decrease of 3-5 % for 2023.
Although low mortgage approvals may not conjure positive expectations for many in the real estate industry, there are silver linings, especially for first time home buyers.
