The value of new mortgages agreed in the last three months of 2022 (£58.4 billion) was 33.5% less than the previous quarter, said the Bank of England.

This was also 24.5% less than a year earlier.

The Bank noted that it was the lowest level of mortgage approvals since 2015, if you exclude the period of the onset of the pandemic and first lockdown, when the housing market was all but closed.

The value of gross mortgage lending in the last three months of 2022 also fell, to £81.6 billion. That’s £4.3 billion lower than the previous quarter, but 16.3% higher than in the last quarter of 2021.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Mortgage approvals dropped like a stone at the end of 2022, after the mini-Budget sent rates soaring, and sent would-be buyers scurrying back into their own homes. It’s why transaction levels at the start of this year have been quite so sluggish.

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“However, the market remains optimistic that there will be some residual strength in approvals as we move further into 2023, especially now that rates have dropped back significantly from the peak. Of course, much will depend on what happens to mortgages if inflation proves difficult to shift, and the Bank of England is forced to keep raising rates.”

Rise in arrears

The value of mortgage balances with arrears rose for the first time since the start of 2021 – by 4.6% over three months and 1.3% over a year.

However, it’s still close to its historic low of 0.78% in 2022, said the Bank of England.

Coles added: “The number of people falling into arrears on their mortgage is starting to rise. Separate figures from the ONS found that at the end of February and beginning of March almost a third (32%) of people found it difficult to pay the rent or mortgage, and almost one in 20 (4%) had already fallen behind.

Meanwhile, the HL Savings & Resilience Barometer found that 347,000 people are at critical risk of falling into arrears, because not only is their mortgage getting more expensive, but they don’t have any emergency savings to fall back on, and they’re already spending more cash each month than they have coming in.

“As yet, none of these are signs of imminent collapse in the housing market, but they are strong indications that weakness may well endure, and could leave some people particularly exposed.”