Salary pressure takes a toll as mortgage approvals fall

High interest rates and falling tech-home wages are causing new mortgages to fall, with the number approved last month falling below pre-epidemic levels.

The number of approved mortgages dropped from 69,500 in March to 66,000 in April, according to the latest money and loan figures released by the Bank of England.

The average rate for a new mortgage rose to 1.82 per cent in April, from 1.5 per cent in December, when the Bank of England raised interest rates four times to a 13-year high of 1 per cent. Financial markets have forecast that the central bank will raise interest rates again by 0.25 percentage point at the next meeting of its monetary policy committee in mid-June.

This rate directly affects monthly payments for about 2 million borrowers in variable mortgages.

However, the amount of debt increased in April after households turned to debt to fund their expenses, statistics show. Consumer borrowing from credit increased by £ 1.4 billion, compared to March mainly on credit cards and personal loans. That number is higher than the pre-epidemic average and exceeded economists’ forecast of £ 1.2 billion.

Families are increasingly relying on credit because 40-year high inflation is depreciating the value of the pay packet, says one analyst.

Inflation rose to 9 percent in April, from 7 percent in March to 54 percent after the energy price cap went into effect, raising household energy bills by an average of £ 700 a year.

According to Nicholas Farr, an assistant economist at Capital Economics Consultancy, the rise in debt could also be a sign that households are not as cautious about spending as they were before high inflation. “In the past it was more common for families to borrow less overall when they were financially strong,” he said. “So the healthy growth of debt also suggests that the cost of living crisis is not being filtered into much more precautionary behavior by families.”

However, families who have accumulated “excess” during the epidemic are reluctant to spend it. Many are still adding to their savings stocks, with cash deposits in the family’s bank accounts increasing by £ 5.7 billion in the past month. That’s better than the £ 4.6 billion pre-epidemic average, but less than the অতিরিক্ত 6.6 billion of additional savings recorded in March.

The proportion of adults who believe they are currently borrowing more than a year ago rose to 21 percent in mid-May, up from 17 percent in mid-April, according to the Office for National Statistics and Lifestyle Survey.

Gabriella Dickens, a senior UK economist at Pantheon Macroeconomics Consultancy, said real spending could decline in the second quarter of the year due to the severity of real income declines, unequal distribution of savings and lower consumer levels. ‘Confidence.’

He added: “Actual spending will gradually increase in the second half of the year as real incomes begin to recover – partly thanks to Mr Sunak’s intervention last week – and because the labor market is relatively tight, families believe it’s safe to borrow. With a little more debt.”