Karim Haji, Head of Financial Services at KPMG, comments on today’s Money and Credit data published by the Bank of England:
“While the rise in mortgage approvals offers some green shoots of hope for recovery, the housing market remains weak. With interest rates still relatively high, affordability will remain stretched and households with fixed-rate mortgage deals coming to end in early 2024 will feel the sting of refinancing at higher rates.
“While market consensus suggests rates will fall over time, in the short term there remains significant volatility which could act as a drag to the recovery of the housing market. For example, the recent uptick in market interest rates has seen several mortgage providers adjust rates up for the first time in many months.
“Many potential buyers face a difficult decision – with an ever-changing external environment they may want to lock in rates now before any potential rate volatility. However, the BoE is expected to start cutting rates later this year and buyers may prefer to wait it out.
“The uptick in consumer borrowing could point to households using disposable income to cover Christmas but then turning to credit to tide them over the longer month of January.
“Households will be looking to the Bank of England and the Budget for a cost-of-living lifeline. And with credit defaults expected to rise further, lenders must ensure customers have the right support to weather the months ahead.”
