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Finanze Daily Digest - 30/11/2022


The Brief: Mortgage borrowing dropped to its lowest total volume since November 2021 to just £4 billion in October after a surge in borrowing costs, according to the Bank of England. Approvals also fell to 59,000 in the same period, from 66,000 the previous month. This is the lowest monthly total since June 2020.


Why It Matters: These figures already reflect the impact of former chancellor Kwasi Kwarteng’s mini-Budget fiasco that caused market turbulence last month. While mortgage rates have started to ease although they still remain high, Zoopla reported a 28% drop in new residential property sales in the four weeks to November 20 year over year.


Finanze Foresights: Mortgage approvals are a strong indicator of future borrowing trends since these reflect mortgage applicants’ income, rental payment history, and everything else that make up their credit score. The drop in approvals, which exceeded most expectations, is a sign of potential homebuyers’ worsening affordability even though the lower property prices are already observed in the market. And as the BoE’s Monetary Policy Committee next convenes on December 15th to announce another possible rate hike, we expect borrowing costs to further squeeze household budgets and reduce their chances of getting on the property ladder. Those who can raise their savings, on the other hand, can be in a better position to offer a higher down payment and reduce their monthly mortgage payments. But the reality of falling real incomes can make such an idea more challenging.


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