Latest rise in approvals reflects increased market confidence, experts say
Net mortgage approvals for house purchases rose again from 51,500 in December to 55,200 in January, while net approvals for remortgaging remained stable at 30,900 in January, the Bank of England (BoE) has reported.
The ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages fell by nine basis points to 5.19% in January.
Individuals repaid, on net, £1.1 billion of mortgage debt in January, compared to £0.9 billion in December.
The BoE’s latest Money and Credit report also showed a negative annual growth rate for net mortgage lending at -0.2% – the first time this has happened since the series began in March 1994.
Gross lending fell from £17.2 billion in December to £16.9 billion in January. Similarly, gross repayments dropped from £19 billion to £18.5 billion during the same period.Insert Mortgage Approvals.png here
“Mortgage approvals have risen for a third month in a row, suggesting that more buyers are starting to accept that the current mortgage rates on offer may well be the new normal,” said Kate Steere, housing expert at personal finance comparison site finder.com. “We faced some tumultuous times in December with inflation figures unexpectedly rising and holding steady at the same rate in January, so it’s great to see that buyer confidence hasn’t been knocked.
“In recent weeks, we’ve seen mortgage rates begin to creep back up, with the price war among lenders starting to cool. This was to be expected, and it’s likely we’ll see a few more ups and downs in the coming months as lenders react to events such as the announcements in the Spring budget.”
According to Marc von Grundherr, director at lettings and sales agency Benham and Reeves, buyer indecision has been the biggest factor slowing the property market over the last year.
“Who can blame them with interest rates climbing and mortgage offers changing by the day?” he said. “However, we simply haven’t seen the same level of hesitation in recent months and market stability has improved notably since interest rates were first held in September of last year.
“This confidence boost has naturally led to an increase in mortgage approvals and sellers are already starting to benefit from a greater degree of interest and an increase in the number of offers submitted.”
Emma Cox, managing director of real estate at specialist lending bank Shawbrook, agreed that the latest rise in mortgage approvals reflects the increasing confidence returning to the market.
“Falling mortgage rates and lower borrowing costs have encouraged a flurry of activity as buyers race to secure favourable deals,” she said. “However, mortgage rates are beginning to creep back up and cuts to interest rates may not materialise as soon as previously predicted.
Cox said those looking to borrow “should act swiftly where possible, concluding deals to future-proof their strategies against a potential rise in borrowing costs.”
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