Approvals for remortgaging also increased
Net mortgage approvals for house purchases rose significantly to 52,000 in March from 44,100 in February, the Bank of England (BoE) has reported.
The latest rise in net approvals – an indicator of future borrowing – builds on the previous increase recorded in February after five consecutive monthly decreases in approvals for house purchases.
Approvals for remortgaging, which only capture remortgaging with a different lender, increased to 32,200 in March from 28,200 in February.
Gross lending also increased slightly from £20.4 billion in February to £20.6 billion in March, while gross repayments fell from £19.9 billion to £19.3 billion.
The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 17 basis points from 4.24% to 4.41% in March, while the rate on the outstanding stock of mortgages rose by nine basis points to 2.73%.
“Today’s uptick in mortgage approvals is a glimmer of hope that the mortgage market is starting to recover following months of turmoil,” Steve Seal, chief executive at Bluestone Mortgages, commented. “However, as speculation rises that the Bank of England will hike interest rates for the 12th consecutive month, affordability challenges remain front of mind for both borrowers and prospective buyers.”
Paul McGerrigan, chief executive at fintech broker Loan.co.uk, also felt encouraged to see mortgage approvals for house purchases increase significantly. He, however, noted that this is still way lower than the net approval figures recorded pre-pandemic.
“It doesn’t take an expert to realise that rapidly increasing interest rates are impacting the property market considerably, members of the Bank of England’s Monetary Policy Committee remain stuck between a rock and a hard place when they meet next week,” McGerrigan said.
“It can take 18 months for monetary policy to work its way into the system to curtail inflation, but can take only weeks to impact the property market. It feels like time for the MPC to hold rates and allow the borrowers and the market the chance to breathe and settle into a more normalised state.”
Rhys Schofield, managing director at Peak Mortgages and Protection, added that March was a steady month in the mortgage and housing market, but in April, things picked up further.
“Costs and higher mortgage rates are clearly a concern for many, but you can’t escape the reality that people need homes to live in, so I’d expect to see mortgage approvals tick up further throughout the year along with modest house price growth,” Schofield said.
Seal, meanwhile, reminded those struggling to keep up with mortgage repayments or worried about how to climb onto or up the property ladder to always ask for help.
“There are brokers and specialist lenders whose ultimate role is to ensure customers and borrowers feel supported in times of uncertainty and point them in the right direction, so that they, too, can achieve their homeownership dream,” he said.
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