The amount of money borrowed by individuals fell from £5.9 billion to £4 billion in October. Meanwhile the number of mortgages which were taken out on house purchases plummeted from 66,000 to 59,000 according to the Bank of England.
Remortgaging figures, however, increased slightly during this same time period, which coincides with the mortgage turmoil following the mini-Budget at the end of September.
It comes just after figures from Zoopla revealed buyer demand for properties had fallen and property price growth was set to end next year.
Alice Haine, personal finance analyst at Bestinvest, said: “October’s sharp drop in mortgage borrowing was to be expected when you consider the catalogue of challenges hitting the housing market.
“From the sharp rise in borrowing costs and higher inflation impacting affordability to falling property prices and a looming recession, it is only natural for many consumers to pause or abandon buying plans.
“The decline in mortgage approvals also reflects the fallout from Kwasi Kwarteng’s disastrous mini budget, which saw buyers failing affordability checks or struggling to find a product at all after lenders pulled products amid soaring borrowing expectations.
“It left some buyers effectively locked out of the market as mortgage rates shot up to their highest levels in well over a decade at 6.65%* for an average two-year fixed product.”
Mortgage rates falling
The market has calmed somewhat since October and the latest figures showed mortgage rates were starting to fall again.
Emma Hollingworth, managing director of mortgages at MPowered Mortgages, said: “ With the average five-year fixed rate deal dropping below 5% last week for the first time in seven weeks, this offers homebuyers a degree of reassurance, following a period of uncertainty in the wake of September’s ‘mini budget’, and it is positive to see products returning to market.”
She added: “With interest rates remaining at their highest levels since 2008, it is critical that potential homebuyers and remortgagers seek professional financial advice in order to help identify and source the most suitable products for them.
“The current economic environment presents a degree of complexity, and it’s important homebuyers receive guidance in order to navigate it.”
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