Interactive Investor

Mortgage affordability hurdle remains insurmountable

ii comments on the latest Bank of England Money & Credit report.

30th August 2023 10:29

by Myron Jobson from interactive investor

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Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The affordability hurdle remains insurmountable for many prospective buyers despite recent falls in inflation, as mortgage rates remain significantly higher than levels of yesteryear. This has translated to a fall in approvals.

“For many, the decision to buy or not to buy hinges on where mortgage interest rates land. Inflation is still key to the direction of mortgage rates. Fixed mortgage rates have dipped following recent falls in inflation. Inflation is expected to remain on the downward trend, led by a fall in energy costs, which could pull down mortgage rates in the process. Put simply, if inflation continues to move meaningfully lower, this takes the pressure off the Bank of England to continue raising interest rates, so mortgage rates could follow.

“Buyers should proceed with caution. With home prices and mortgage rates remaining elevated, buyers should be careful to avoid biting off more than they can chew.”

“The modest reprieve in approvals for remortgaging is much of a muchness, but it could be a sign of things to come, with mortgage deals ticking lower amid expectations that interest rates won’t rise as high as feared.

“The fact remains that recent housing market activity pales in comparison with the summer seasons of yesteryear because of the housing affordability squeeze. With mortgage rates likely to remain high for the foreseeable future, affordability is the key challenge facing borrowers.”


“The combined net flow of both household deposits with banks and building societies and NS&I accounts amounted to £300 million in July, a significant decrease from £3.6 billion in the previous month. The fact remains that many Britons are still allocating a sizeable chunk of their income towards covering basics necessities such as food and energy. The soaring cost of rents have been a particular pain point, exacerbating the cost-of-living squeeze on budgets. This leaves them with less disposable income to save.”

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