Mortgage approvals for home-buyers hit highest level since Liz Truss mini budget

By Staff

Some 60,383 mortgage approvals for house purchase were recorded in February, marking the highest figure since 65,349 deals got the go-ahead in September 2022, according to Bank of England figures

The number of mortgages approved to home-buyers increased in February to the highest level seen since the month the mini-budget was delivered under former prime minister Liz Truss.

Some 60,383 mortgage approvals for house purchase were recorded, marking the highest figure since 65,349 deals got the go-ahead in September 2022, according to Bank of England figures. It was also the first time since September 2022 that mortgage approvals for house purchase have been above the 60,000 mark.

Mortgage rates rocketed amid market turmoil, following the launch of the mini-budget on September 23 2022, with the average two- and five-year fixed mortgage rates on the market surging above 6% and later easing back. More recently, signs that inflation is easing have bolstered hopes for a cut in the Bank of England base rate.

Nationwide Building Society also reported on Tuesday that the average UK house price fell by 0.2% month on month in March. However, the fall was described by some economists as a “blip” or temporary interruption to house price growth.

The Bank’s Money and Credit report said the “effective” interest rate the actual interest typically paid on newly-drawn mortgages fell by 29 basis points, to 4.90% in February. Lucian Cook, the boss of residential research at estate agents Savills, noted: “A small monthly fall in house prices in March is a reminder that, despite a stabilisation in mortgage rates, affordability pressures remain for mortgaged buyers.”

He added: “Encouragingly, mortgage approvals for house purchases continued to pick up in February, rising above 60,000 for the first time since September 2022.” However, he warned that they are still below their pre-pandemic norm of around 66,000, as cash and equity-rich buyers maintain an advantage.

Simon Gammon of Knight Frank Finance, said that he “wouldn’t be surprised” to see approvals for buying houses go beyond 70,000 later this year. These figures were shared at the same time as credit information firm Experian reported an upswing in mortgage applications early in 2024, suggesting consumers are getting back into the market.

Experian singled out locations like West Cumbria, Manchester, South Teesside and Blackpool in the north of England; Edinburgh and North Lanarkshire in Scotland and Birmingham and Leicester in the Midlands, where mortgage application growth has been exceptionally strong.

In some places like the Causeway Coast and Glens in Northern Ireland, the Isle of Wight, Plymouth, and parts of Scotland, mortgage requests have remained fairly static, says Experian.

John Webb from Experian said: “It’s encouraging to see the start of a shift in consumer attitudes to mortgage applications. But the reality is that many people are still hesitant, as mortgage rates remain relatively high. What we are seeing is therefore likely the first green shoots of a long road to recovery and return to market after the huge impact the pandemic has had on our economy.”

Andrew Montlake from Coreco mortgage brokers said: “After the Easter break, I suspect we will see a further rise in activity as pent-up demand from buyers, further buoyed by the easing of mortgage rates and criteria, acts to keep property prices from falling further..”

“We are hopefully standing on the precipice of a continued reduction of inflation and a stabilisation of interest rate movements which will allow lenders to price more competitively and keep rates around for longer, rather than the sharp staccato changes we have been seeing for too long now.”

Looking at non-mortgage borrowing, the Bank of England figures showed that the annual growth rate for consumer credit slowed from 9.0% to 8.7%. Consumer credit includes borrowing such as credit cards, overdrafts, personal loans and car finance

Adam Butler from StepChange Debt Charity said: “While for some borrowing may indicate rising confidence, for others it will be an emergency response to being unable to make ends meet. There’s a real risk that rising borrowing equates to a worsening of the debt situation for some households.” In February, people put £6billion more into their bank and building society accounts, which is the fifth month in a row it’s gone up.

In February, businesses in the UK paid back more loans than they took out, with net repayments of £3.3billion, compared to £0.2billion in January. Also, UK businesses put £1.8billion into their bank and building society accounts in all types of money, after taking out £19.9billion in January.

Susannah Streeter, head of money and markets, Hargreaves Lansdown, said: “Although the light at the end of the tunnel of painfully high borrowing costs is shining that bit brighter, there is still a dark space to crawl through before companies and consumers feel significantly more financially secure.”

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