Post by : Saif Rahman

In October, the number of mortgages approved by British lenders dipped slightly from September, though it exceeded many analysts' expectations. This minor decline highlights the cautious financial decisions being made by individuals in the UK due to ongoing tax modifications and economic unpredictability.

The Bank of England reports that 65,018 mortgages were approved in October, a drop from 65,647 in September—marking the lowest monthly total since May. Economists had predicted only 64,200 approvals, indicating that the outcome was better than their forecasts. Despite the decline, the market's resilience surprised some financial analysts.

This slowdown coincided with Finance Minister Rachel Reeves unveiling her latest budget that proposed higher taxes on costly properties. This initiative stirred anxiety among potential homebuyers and investors, resulting in a more wary atmosphere in the housing sector. Reeves' taxation strategy is part of a wider plan to regulate government spending and stabilize public finances.

The Bank of England further reported a notable decrease in approvals for re-mortgaging, the sharpest drop since February. Many homeowners contemplating changes to their mortgage arrangements hesitated, uncertain of how the new tax framework would impact their decisions.

Additionally, the net mortgage lending figure, which illustrates the number of completed home sales, fell from £5.223 billion in September to £4.273 billion in October. This decline suggests that fewer individuals finalized home purchases, potentially waiting for more definitive guidance regarding future tax liabilities and interest rate adjustments.

Simon Gammon, managing partner at Knight Frank Finance, remarked that lingering uncertainty about tax hikes and continuing policy leaks eroded confidence in the housing market. While he acknowledged that such unclear signals made buyers hesitant, he also noted that the minor drop in approvals keeps monthly activity near pre-pandemic levels, indicating that the market remains both active and stable.

Experts are optimistic that some uncertainty is subsiding. Anticipation of a base rate cut by the Bank of England in December could lower borrowing costs, perhaps stimulating activity in the housing market in the near future.

The data from the Bank of England also revealed a slowdown in consumer borrowing in October. Net consumer credit increased by £1.1 billion, falling short of economists' expectations of £1.35 billion, and lower than the £1.398 billion borrowed in September. Nevertheless, the annual growth rate of consumer credit remained steady at 7.2%, one of the highest levels observed since late 2024.

This borrowing slowdown occurred just before the announcement of the government's new tax and spending strategy. Households were increasingly displaying caution, as previous reports indicated declines in retail sales and consumer confidence throughout October, reflecting reduced spending and a growing sense of insecurity regarding the economy.

Overall, the mortgage and borrowing statistics indicate that many in the UK are approaching their finances with caution. Rising taxes and persistent economic uncertainty lead both buyers and consumers to delay significant financial commitments. Should interest rates decrease in December, it could provide a much-needed uplift for the housing market and consumer expenditure in the months ahead.

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