What does this mean for the UK mortgage market?
Mortgage approvals for house purchases increased to 64,900 in August – the highest since August 2022 and up from 62,500 in June, according to the latest data from the Bank of England (BoE).
Approvals for remortgaging, which only include remortgaging with a different lender, also increased to 27,200 from 25,200, putting an end to the downwards trend observed since March.
Net borrowing of mortgage debt by individuals increased to £2.9 billion in August from £2.8 billion in July.
The BoE’s latest Money and Credit report also revealed that the annual growth rate for net mortgage lending rose for the sixth consecutive month, from 0.6% in July to 0.7% in August, the highest since August 2023, when it was 1%.
Gross lending increased by £0.3 billion to £19.9 billion in August compared with the previous month, while gross repayments increased by £1.3 billion to £18.4 billion over the same period.
The ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages was 4.84% in August, up from 4.81% in July. The rate on the outstanding stock of mortgages also rose by three basis points to 3.72% in August.
“Today’s uptick in mortgage approvals indicates a road to recovery for the UK mortgage market,” said Ryan Davies (pictured left), strategy director at Bluestone Mortgages. “With interest rates having fallen from their historic high, and the mortgage rate war between lenders continuing to gather pace, the outlook remains bright.”
According to Jonathan Samuels (pictured right), chief executive of Octane Capital, the third consecutive monthly rise in mortgage approval levels signals that buyers are returning to the market at mass in order to make their move before Christmas.
“We haven’t quite seen the reduction in mortgage rates that you might expect following August’s base rate reduction,” he said. “However, it remains very early days and what we have seen is a significant cut to rates across all lending segments when compared to this time last year.
“This increased level of borrowing affordability has come as a result of increased market stability following the Bank of England’s original decision to hold rates at 5.25% in September of last year and, with market conditions continuing to improve, it’s only a matter of time before we see further rate reductions.”
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