The number of mortgage approvals for home purchases in the UK saw a steeper decline than expected in April, suggesting a shift in market behaviour following the end of a stamp duty tax break. According to the latest data released by the Bank of England, this tax relief expiry has had a cooling effect on housing demand.
Mortgage approvals dropped for the third month in a row, with figures showing a fall of 3,100 to a total of 60,500 approvals. This decline was below what many economists had forecast, signalling a slowdown in buyer activity.
In contrast to the dip in home purchase approvals, remortgaging activity recorded a slight increase. The number of approvals for remortgaging – where homeowners switch to a new lender – rose by 1,600 to reach 35,300 in April. This followed a similar rise observed the previous month.
The end of the government’s stamp duty holiday in March played a significant role in this market shift. Many buyers had rushed to complete their transactions before the deadline, resulting in a spike in activity. However, once the tax break ended, the market saw a noticeable drop.
HM Revenue and Customs (HMRC) reported approximately 64,680 house sales in April, a sharp fall from the 177,440 sales recorded in March. This represents a 64% drop in monthly transactions, highlighting the impact of the expired tax incentive.
The stamp duty changes, which apply in England and Northern Ireland, appear to have discouraged some buyers from moving forward with their plans to purchase a home. This has contributed to a slowdown in market momentum.
Interest rates also shifted slightly during this period. The average interest rate on newly drawn mortgages decreased marginally to 4.49% in April, offering some relief to new borrowers.
Meanwhile, the cost of servicing existing mortgages rose slightly. The average interest rate on outstanding home loans increased from 3.84% in March to 3.86% in April, adding to the financial burden on current homeowners.
Richard Donnell, Executive Director at property portal Zoopla, commented that the dip in mortgage approvals in April may have been influenced by the timing of Easter. He stated that the holiday could have disrupted normal transaction volumes.
Donnell also noted that despite the slowdown in April, there are early signs of recovery. He expects mortgage data for May to show an uptick, in line with a rise in the number of sales being agreed – which, according to him, are currently at their highest level in four years.
He further explained that a major factor contributing to renewed activity is the easing of affordability tests by lenders. This adjustment has enabled the average buyer to borrow up to 20% more than they could just a few months earlier.
Looking ahead, Donnell anticipates a busier June as more buyers attempt to finalise property purchases before the summer holidays begin, a period typically associated with a slowdown in housing activity.
On the borrowing side, net mortgage debt experienced a substantial drop. The figures showed a decrease of £13.7 billion, leading to a net borrowing figure of -£800 million in April. This marked a significant shift from March, when net borrowing had surged to £13 billion due to the stamp duty rush.
Gross lending also took a substantial hit, falling to £16.9 billion in April from £39.9 billion the previous month. This was the steepest month-on-month decline since June 2021 and reflected a general cooling of market activity.
Repayments mirrored this trend, decreasing from £23.7 billion in March to £18.4 billion in April, further emphasising the subdued state of the mortgage market.
Nathan Emerson, Chief Executive of industry body Propertymark, attributed the market’s sluggishness to affordability concerns. He pointed out that as global economic conditions continue to adjust, potential buyers are becoming more cautious.
He also remarked that while some mortgage lenders have begun to offer more competitive rates, the eligibility criteria for securing these deals remain quite stringent, limiting access for many would-be buyers.
Another factor potentially delaying housing moves is the stamp duty threshold hike introduced across England and Northern Ireland from the beginning of April. This may have led many to pause or reconsider their decisions.
In addition to housing-related credit, the Bank of England also noted a rise in consumer borrowing. Consumer credit rose from £1.1 billion in March to £1.6 billion in April, with annual growth in this area climbing to 6.7%. The effective interest rate on new personal loans also increased, reaching 8.69%.
Alice Haine, a personal finance analyst at Bestinvest by Evelyn Partners, urged consumers struggling with multiple debts to take proactive steps. She suggested revising household budgets or consulting with free debt counselling services to improve long-term financial stability.
Haine referred to the cost spikes seen in April as “Awful April,” highlighting how quickly living expenses can escalate. She stressed the importance of managing personal finances effectively to withstand future economic pressures and prepare for major life goals such as retirement.
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