Lending transactions hit lowest level in almost three years

Mortgage lending transactions hit lowest level in almost three years

The latest market analysis by specialist property lending experts, Octane Capital, has shown that since the Bank of England began to increase interest rates in December 2021, the total number of mortgage lending transactions has declined by 7.1% when compared to the same time period prior.

What’s more, the 95,405 total mortgage lending transactions seen in February of this year is the lowest monthly total since May 2020.

Octane Capital analysed the number of mortgage lending transactions seen across the UK market in the 15 months since interest rates started to climb (December 2021 to February 2023 – latest available data) and how this market performance compares to the 15 months prior.

The figures show that in the 15 months prior to this first interest rate hike, a total of 1.855m mortgage transactions completed via monetary financial institutions such as banks and building societies.

An additional 183,346 transactions completed by way of other specialist lenders, totalling just shy of 2.1m mortgage lending transactions during this time period and a monthly average of 138,660 over 15 months.

Since December 2021, this total has fallen to just over 1.9m transactions, equating to an average of 128,800 transactions per month.

This means that in total, mortgage lending transactions have fallen by -7.1% since interest rates started to climb. At -19.5%, the decline seen in transactions fuelled solely by specialist lenders has been far more notable than the -5.9% decline seen via monetary financial institutions.

While monthly mortgage lending transaction trends have been inconsistent since the first interest rate hike in December 2021, it’s clear that the driving factor behind this decline was last September’s mini budget and the mortgage sector turmoil that followed.

Since a peak of 150,308 in October of last year – the highest monthly total since September 2021 – , total mortgage lending transactions have fallen each and every month to a low of 95,405 in February of this year.

This not only marks a -37% decline between October 2022 and February 2023, but is the lowest monthly total on record since May 2020.

CEO of Octane Capital, Jonathan Samuels, commented:

“The Bank of England has deployed a rather aggressive policy with regard to curbing inflation via a string of interest rate hikes and it was only a matter of time before this started to have a notable impact on mortgage lending transactions.

While the growth in mortgage lending transactions has been inconsistent in the months that followed the first hike in December 2021, it’s fair to say that this negative impact was accelerated quite substantially following September’s mini budget and the mortgage market chaos that ensued.

The broad feeling across the industry is that 2023 is likely to bring greater certainty and stability which should help stabilise the market. However, an eleventh consecutive increase so early in the year is unlikely to fill the nation’s homebuyers with confidence and so it could be some months yet before we see this negative trend start to reverse fully.”