Are Mortgage Approvals Set to Soar in 2022?

New market analysis has revealed that despite a dip in February, mortgage approval levels could climb right through until Christmas as the pandemic property market boom shows little sign of slowing.

Although February saw a slight dip in mortgage approval levels, down 4% versus January, homebuyers continue to swamp the market at record rates.

In fact, the analysis of mortgage approval data shows the 70,993 mortgages approved make it the fourth strongest February performance in the last decade.

Additionally, there were a total of 944,487 mortgage approvals in 2021, by far the largest level in the last decade and 60% more than the total registered in 2011.

But with a number of successive base rate increases in recent months and the escalating cost of living putting a squeeze on household finances, are mortgage approvals likely to fall in 2022?

Historic market performance suggests not, with the data showing that traditionally, mortgage approvals average a total of 64,000 at the start of the year, falling to a low of 52,430 by May.

They then accelerate to breach the 65,000 threshold by August and keep on climbing right through until December, hitting a peak of 66,270.

With mortgage approvals already sitting some way above the historic average in 2022, another year of record market activity could well be on the cards.

However the specialist property lending experts responsible for the analysis, Octane Capital, believes that escalating mortgage rates could bring a premature end to the current housing market heatwave, with a far more settled landscape materialising in its place.

CEO of Octane Capital, Jonathan Samuels, commented:

“We look set for another year of strong property market activity, driven by our insatiable appetite for homeownership.

Historic market performance suggests that mortgage approvals are likely to climb as the year progresses, but while the property market continues to perform very well at present, mortgage costs are also set to keep on climbing.

We’ve already seen a marginal increase as lenders reacted to a string of successive base rate increases and this is really only the tip of the iceberg.

As mortgage rates and the resulting cost of borrowing start to rise, it will inevitably dampen both the sums being borrowed and the price being paid for property.

This will impact topline house price values but it’s unlikely to cool the market to the extent that mortgage approvals start to drop.”

Tables show the total annual level of mortgage approvals and the annual breakdown by month along with the 10 year average by month. Source: Bank of England.