Upward trend reflects increasingly confident homebuyers
Net approvals for both house purchases and remortgages rose again in the last month of 2023, continuing the upward trend in both numbers, the Bank of England (BoE) has reported.
Net mortgage approvals for house purchases rose to 50,500 in December from 49,300 in November, while net approvals for remortgaging increased to 30,800 in December from 25,700 in the previous month.
There was a six-basis-point decrease in the ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages, which now sits at 5.28%.
The BoE’s latest Money and Credit report also showed a flat annual growth rate for net mortgage lending – the first time this has happened since the series began in March 1994.
Gross lending also continued to increase, from £16.4 billion in November to £17.2 billion in December. Gross repayments went up too, from £15.6 billion to £19.1 billion over the same period.
Meanwhile, individuals repaid, on net, £0.8 billion of mortgage debt in December compared to net zero in November.
“The increase in mortgage approvals at the close of 2023 reflects what we saw on the ground, where buyers became increasingly more confident in the market,” Reece Beddall, sales and marketing director at specialist lender Bluestone Mortgages, commented. “This was being driven by a decline in inflation, the Bank of England maintaining interest rates, and lower mortgage rates compared to earlier in the year. We are seeing this momentum into January, marked by heightened competition among lenders as they continue to cut rates, boosting buyers’ confidence.”
Tomer Aboody, director at property lender MT Finance, said “there are signs that the Bank of England’s monetary policy is having the desired effect with a softening of consumer spending and confidence, despite the pick-up in mortgage approvals.”
“While inflation is increasingly under control and nearing the bank’s 2% target, it looks as though we are heading into a period of nominal to flat growth, requiring some government stimulus for the economy in early 2024, perhaps in the budget. A rate reduction this year, in order to support and encourage growth and investment, would be extremely welcome.”
Jonathan Samuels, chief executive at specialist lender Octane Capital, agreed that homebuyers were continuing to grow in confidence due to a reduction in mortgage rates in recent months. He pointed out, however, that these mortgage rate reductions were based on previous expectations across the swap market that the Bank of England will reduce the base rate this week.
“These expectations have been changing in recent weeks, and we’ve seen swap rates start to creep up based on the likelihood that the base rate will remain at 5.25% for the immediate future,” Samuels added.
“As a result, mortgage approvals have climbed, but not at the rate forecast, and we anticipate that should mortgage rates start to climb again in February, it could further dampen the enthusiasm that has been shown by buyers in recent months.”
Any thoughts on the figures revealed in this Bank of England report? Share them with us by leaving a comment in the discussion box at the bottom of the page.
