Mortgage approvals are up, but house sales are down. What's really happening to the property market?

Mortgage approvals have risen to their highest rate since 2007; house prices are still rising; but is all as it seems with the housing market? We examine the figures

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The number of mortgage approvals in the UK has risen to the highest levels since 2007, with many interpreting this figure as a sign of a major housing market revival. The number of mortgages approved was 29 per cent higher this August than in August 2019. And yet, these figures sit alongside another, less encouraging one, in the latest Halifax house price index: the number of property transactions in the UK was 16.3 per cent lower in August 2020 than it was the same time last year. 

How are buyers and sellers to make sense of these statistics, and what do they really tell us about the state of the property market? 

Firstly, it's important to note that most portrayals of the current state of the housing market as a 'boom' rely on comparisons between the lockdown months of March-May and the surge in activity that followed. Of course the numbers of new instructions and buyer enquiries rose as soon as restrictions were lifted; in that sense, the housing market did bounce back, but in a way that was entirely predictable.

However, all data released throughout the summer and now in September shows us that high demand doesn't necessarily translate into increased transactions. Partly this is because there simply isn't enough property to go around to satisfy the demand, but we're also now seeing something different: mortgage approvals that don't match up to the number of house sales. Why is the number of house sales lower than the number of mortgages approved?

One explanation is that house sale completions are lagging behind due to delays in conveyancing, and will continue to do so for several months. In fact, it's this backlog of completions that is likely to keep propping up the positive housing market figures until the end of the year. The other reason is that a mortgage approval is not yet the guarantee of a completion, particularly where house chains are involved. Since all house sales are taking longer, it is likely that those buyers who are also sellers are waiting as links in long property chains. This could mean that we're seeing the beginnings of the UK property market shifting away from first-time buyers and towards existing home owners. 

In fact, the latest figures from the FCA suggest that this is what's happening. Despite the fact that mortgage approvals were up in September, the value of new mortgage commitments (lending agreed to be advanced in the coming months) was 53.2 per cent lower than a year earlier. That is a huge reduction in the value of lending that reflects the decimation of high-LTV mortgages in 2020. Yes, mortgages are still approved, but the loans are significantly smaller. 

In other words, yes, mortgages are being issued, but mostly likely to wealthier, existing home owners with substantial equity, not first-time buyers. House sales are moving slower, partly because of Covid-related delays to surveys and conveyancing, but also partly to a growing scarcity of chain-free buyers. 

What should you take away from all of this if you're buying a house? In a nutshell: expect substantial delays to the process, especially if you're selling in order to buy. And have your mortgage offer ready at the earliest possible opportunity – there's no time to waste, particularly if you want to take advantage of the stamp duty holiday that ends in March. 

Whether you are a first-time buyer or remortgaging, use Habito's mortgage comparison tool below to see what mortgage rates you could get. 

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Anna is a professional writer with many years of experience. She has a passion for contemporary home decor and gardening. She covers a range of topics, from practical advice to interior and garden design.