Are Mortgage Applications Increasing?

Mortgage Borrowers

This year was meant to be the boom for mortgage applications but has this really been the case and to what extent are these mortgage applications being approved?

Post-Pandemic Mortgage Applications

2021 was predicted to be the year that the housing market recovered. After the lockdown froze the housing supply chain, there was a boom in demand as people came out of the pandemic. Aided by the Stamp Duty holiday, the mortgage market was also booming.

At the beginning of 2021, UK mortgage approvals rose to the highest level on record in the last 13 years. In fact, November 2020 showed the highest figure for mortgage approvals by banks and building societies since August 2007 – a staggering 105,000.

Towards the end of 2020, the number of monthly approvals was increasing month-on-month by 7,700 showing an exponential boom in the mortgage market.

Although the mortgage market has stabilised since these dramatic changes, it seems that there is still a high demand for mortgage applications and a high volume of mortgages being approved.

Mortgage Applications on the Rise

Nationwide reported that mortgage applications remained robust during the month of September 2021 with a figure of 72,645 – 10% higher than the average for the same month in 2019.

The Bank of England has offered some relief for borrowers, ensuring that the base rate will remain at 0.1%, at least until the 16th December. This record low has been in place since March 2020 and has facilitated house purchase for many borrowers.

Now could be a good time for borrowers to capitalise on the low base rate as they may be able to secure a competitive interest rate on a fixed term mortgage. However, with the uncertainty of the market, it is difficult to know how long this might last.

90% and 95% Mortgages

In order to encourage first-time buyers, mortgage rates are continuing to fall with 90% and 95% mortgages, with interest rates of below 2% and 3% respectively, becoming more widely available.

After many of these high-percentage mortgages were removed from the market during the Covid pandemic, the 95% mortgage guarantee scheme launched in April led to a steady decrease in mortgage rates and more mortgage products entering the market.

House Prices On The Rise

The Mortgage Bankers Association survey showed that house sales for October, both for new and existing-home sales, were at their strongest sales pace since early 2021. However, first-time home buyers were not being represented in these figures as they are accounting for less and less activity as rates increase.

As home prices rise, and mortgage rates increase, it is becoming increasingly unaffordable for new buyers to get on the property ladder.

In October 2021, the average UK house prices exceeded £250,000 for the first time with annual house price growth at 9.9%.