Prospect of potential rate squeeze prompts rush of activity
UK mortgage approvals climbed to their highest level in four months in March as buyers moved quickly to secure loans before the prospect of higher-for-longer interest rates feeds fully through to pricing, Bank of England data indicate.
According to the central bank’s latest money and credit figures, approvals for house purchase rose to 63,531 in March, up from 62,708 in February and comfortably ahead of market expectations for a drop towards 60,000. The increase marks a clear break from the subdued activity seen through much of 2023, when elevated borrowing costs and affordability pressures kept many would‑be movers on the sidelines.
The rise in approvals comes against a backdrop of shifting rate expectations. Earlier in the year, markets were pricing in a swift series of Bank Rate cuts as inflation cooled. In recent weeks, stickier price data and firm wage growth have led investors to scale back those bets, pushing up gilt yields and, in turn, the swap rates used by lenders to set fixed‑rate mortgage pricing. For many borrowers, that has created a renewed urgency to transact before mortgage products become more expensive.
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Brokers report a noticeable uptick in enquiries from both first‑time buyers and home movers seeking to fix their repayments while headline rates remain below the peaks reached after the 2022 mini‑Budget. Intermediaries say that, although rates are well down from those crisis levels, the direction of travel in funding costs over the past month has prompted a fresh wave of applications from clients who had been waiting on the side‑lines for clearer evidence of rate cuts.
The approvals data suggest that this shift in sentiment is starting to show up in the official numbers. A level above 63,000, while still below the boom‑era norms of more than 70,000 a month, is materially stronger than the lows recorded last year and more in line with a modestly recovering market. Many lenders have been reporting increased new business pipelines since late winter, helped initially by aggressive rate cuts in January and February as competition returned to the high street.
Now, however, the balance of risk has turned. Markets are questioning how quickly the Bank of England can loosen policy without reigniting inflation, and that uncertainty is filtering through to mortgage desks. Several major lenders have already nudged up selected fixed‑rate products or withdrawn their cheapest deals, and the approvals surge in March may partly reflect borrowers bringing forward decisions in anticipation of further repricing.
