Is the pandemic real estate market boom running out of steam?

Despite a strong start to the year in house price growth, a month-over-month decline in mortgage approvals has many wondering if the pandemic housing market boom could soon run out of steam.

However, the latest market analysis from home lending experts Octane Capital has revealed that the heat may have already left the market when it comes to new buyer activity, the volume of mortgages approved on home purchases barely increasing on an annual basis.

Analysis of Bank of England mortgage data shows there were nearly 1.6 million mortgage approvals in the last financial year (2021/22), a 10% increase on to the previous year.

894,393 of them came from home purchases, which represents 57% of all mortgage approvals.

But while homebuyers remain by far the most active segment of the market, this level of activity has only increased by 1% compared to the previous financial year (2020/21).

In this first pandemic year (2020/21), 884,482 mortgages were approved for the purchase of a home, representing 62% of total mortgage approvals and a considerable increase of 11% compared to to the previous year (2019/20).

While the latest level of annual mortgage approvals on home purchases remains at a high level, this drastic reduction in the annual growth rate suggests that the increased market activity driving the current pandemic housing market boom begins to level off.

A fourth consecutive interest rate hike and the likelihood of more to come should further dampen this buyer demand over the course of the year, with mortgage approvals through home buying likely to fall as a result.

In fact, rising interest rates spurred a higher level of growth in those who were approved for a mortgage when remortgaging their existing property and remortgages accounted for 32% of all mortgage approvals. in the last financial year (2021/22) – totaling 501,501.

While still a smaller market segment compared to those buying a home, homeowners’ level of remortgage climbed 23% year over year, compared to a 1% increase for those buying a home.

CEO of Octane CapitalJonathan Samuels, commented:

“The number of buyers approved for a mortgage on the purchase of a home has continued to climb year over year and remains incredibly high.

So in that sense, the real estate market is still extremely hot, although it certainly seems to have bottomed out with the volume of mortgage approvals for home purchases only up one percent. compared to the previous year.

A wave of base rate increases towards the end of last fiscal year will no doubt have contributed to this reduction in buyer appetite and, in contrast, we have seen a sharp increase in those paying off for better rates before any new interest rate. hikes.

With a fourth increase coming so early this fiscal year, there is a very good chance the market will now start to deflate, bringing real estate values ​​down to earth and returning the market to a state of pre-pandemic normalcy.


Penny D. Jackson