7 Apr 2023

Mortgage Approvals and Sales Volumes

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Clear relationship between mortgage approvals and sales volumes

  • Official data indicates sales volumes in February were 4% lower than January, while mortgage approvals for the month were 10% higher, the most significant uptick at this time of year since 2011.
  • In the 5 years prior to the pandemic, mortgage approvals in February were on average 1.2% lower than in January. With mortgage approvals considered a forerunner of housing market activity, demand in the sales market is likely to rise over the spring.
  • The mortgage market is stablising. The decision by the Bank of England to raise the base rate of interest to 4.25% was largely expected and there has been little movement in long-term swap rates since the announcement.
  • Spikes in sales volumes in recent times have historically been linked to government changes to property taxation. The impact of changes in 2016 and 2021 is clearly visible.
  • In the last decade peaks in the sales market have been associated with changes to property taxation including the 3% surcharge on additional homes in 2016 and the Stamp Duty Holiday in 2021.

Source: Dataloft, HMRC, Bank of England

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