Is the pandemic property market boom fizzling out?

Is the pandemic property market boom fizzling out? Latest data suggests so

Despite a strong start to the year where house price growth is concerned, a month on month dip in mortgage approvals has caused many to speculate whether the pandemic property market boom may soon fizzle out. 

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

The analysis of Bank of England mortgage data shows that there were almost 1.6m mortgage approvals during the last financial year (2021/22) – a 10% increase on the previous year. 

894,393 of these came via house purchases, accounting for 57% of all mortgage approvals. But while homebuyers remain by far the most active segment of the market, this level of activity increased by just 1% when compared to the previous financial year (2020/21).

During this initial pandemic year (2020/21), 884,482 mortgages were approved for house purchases, accounting for 62% of total mortgage approvals and climbing by a considerable 11% when compared to the previous year (2019/20). 

While the latest level of annual mortgage approvals on house purchases remains at a high, this drastic reduction in the annual rate of growth suggests that the heightened market activity driving the current pandemic property market boom is starting to plateau. 

A fourth consecutive interest rate increase and the likelihood of more to come is expected to dampen this buyer demand further as this year goes on, with mortgage approvals via house purchases likely to drop as a result. 

In fact, increasing interest rates have spurred a greater level of growth from those being approved for a mortgage when remortgaging their existing property and remortgages accounted for 32% of all mortgage approvals during the last financial year (2021/22) – totalling 501,501. 

While this remains a smaller market segment compared to those purchasing a house, the level of homeowners remortgaging climbed by 23% year on year versus the 1% increase of those purchasing a house. 

CEO of Octane Capital, Jonathan Samuels, commented:

“The level of buyers being approved for a mortgage on a house purchase has continued to climb year on year and remains incredibly high. So in this sense, the property market is still running extremely hot, although it certainly seems to have hit the ceiling with the volume of mortgage approvals for house purchases climbing by just one percent versus the previous year. 

A hatrick of base rate increases towards the end of the last financial year will have no doubt contributed to this reduction in buyer appetites and, in contrast, we’ve seen a sharp uplift in those remortgaging to secure better rates ahead of any further interest rate hikes. 

With a fourth increase coming so soon in this financial year, there’s a very good chance that the market will now start to deflate, bringing property values back down to earth and returning the market to a state of pre-pandemic normality.”

Data tables

Mortgage approval data sourced from the Bank of England. 

View full data tables online here.