Increased mortgage approvals and higher house prices indicate a recovery
As starts to the week go, this one has begun on a decidedly buoyant note – with experts suggesting that two key sources of data provide encouraging evidence of a market recovery.
Firstly, released data from the Bank of England in its Money and Credit Report shows that mortgage approvals for property purchases rose from 62,500 in June to 64,900 in August. Approvals for remortgaging with a different lender also jumped to 27,200 from 25,200.
There came, too, the latest findings of the Nationwide House Price Index indicating that UK house prices rose by 0.7% in September.
The response from some key industry professionals was upbeat.
John Phillips, CEO of broker firm Just Mortgages and Spicerhaart estate agents, said the data provides a “cautiously optimistic” outlook for the housing and mortgage market.
“A net increase of £2.9 billion in mortgage borrowing and a rise in approvals to 64,900 – the highest since August 2022 – reflects strong demand, despite wider economic challenges,” said Phillips (pictured left). “This is particularly encouraging as we’ve seen recent reductions in swap rates, which have helped to stabilise mortgage pricing, creating more favourable conditions for both homebuyers and those looking to remortgage.
“The increase in remortgaging approvals suggests that more consumers are taking advantage of these improved rates, locking in better deals. As brokers, we are well-positioned to guide borrowers through this landscape, ensuring they make informed decisions at a crucial time. While consumer credit borrowing has seen a slight uptick, it's evident that households are consolidating their finances, preparing to manage the current economic pressures.”
He added: “Looking ahead, the combination of falling swap rates and rising mortgage approvals signals a more positive outlook for the mortgage market. Additionally, the increase in borrowing by private non-financial corporations (PNFCs) suggests growing business confidence, which could help stimulate broader economic growth as we move towards the end of the year.”
David Hollingworth, associate director of communications at broker L&C Mortgages, said the increase in mortgage approvals for house purchases continued to grow, giving hope for a continued growth in activity in the purchase market.
“Falling mortgage rates have been central to the improvements in consumer confidence,” said Hollingworth (pictured centre). “If the markets are right and we see another base rate cut in November that should help to add momentum as we look towards next year, assuming there are no nasty surprises in the Budget before then.
“The growing optimism around the direction of travel for interest rates looks to be feeding into house prices. Although activity remains subdued in comparison to the peaks of the pandemic period, the negative impact of the mini-budget and spike in interest rates looks as though its gradually being overcome, driven by the easing in mortgage rates and consequent improvement in affordability.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said approvals rising for new purchases bodes well for housing market activity in the final quarter.
“Remortgage approvals also picked up after a dip in July, suggesting a growing number of borrowers are drawn to 'best buy' rates offered by other lenders, rather than sticking with their existing provider,” observed Harris.
“The effective interest rate paid on new mortgages edged up slightly to 4.84% in August, but with a Bank of England base rate cut, coupled with lenders reducing mortgage rates, we expect lower pricing to be reflected in next month’s data."
North London estate agent Jeremy Leaf, a former RICS residential chairman, said that buyers are emerging from summer hibernation to take advantage of cheaper mortgages with the prospect of more to come, as well as an increasingly-settled economic and political background.
"A good way of establishing whether the recent housing market improvement is likely to be sustained is to look at mortgage approvals - and these figures are no exception,” he noted.
“Following hard on the heels of the acceleration in house prices as reported by Nationwide, commitments to purchase are also climbing at their best rate for around two years.”
He added: "Looking forward, improved property choice and worries about the painful budget, in just over four weeks, means prices will not increase rapidly as part of an increasingly settled period."
For Tanya Elmaz (pictured right), director of intermediary sales at Together, the annual rise in house prices is a further sign of the market’s wider recovery.
“Activity continues to tick over, despite there being some reservations around what’s to come from the autumn budget,” she commented.
“Indeed, while most buyers and sellers are pressing on with their property plans, with Starmer’s warnings of the tough announcements expected next month and the Bank of England deciding to hold rates this month, some may prefer to wait for further falls in mortgage rates before making their property move.”
