Approvals increased to 74,300 in August, up from 63,700 in July, and the highest level since January, the latest stats showed.

At the same time, the effective interest rate on mortgages lifted by 22 basis points to 2.55 per cent.

Net borrowing of mortgage debt increased to £6.1bn in August, up from £5.1bn in July, and well the pre-pandemic average of £4.3bn.

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said the late summer lift in mortgage activity could be a “last hurrah” for approvals new buyers.

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She added: “Buyers were holding up despite everything the market was throwing at them, but the latest twist in the mortgage tale could change the narrative dramatically.

“The surge in August may owe a great deal to buyers who decided it was ‘now or never’ for a house purchase. If they wanted to buy, and get in before Christmas, they needed to secure a mortgage before rates rose again. They may be relieved they did so before chaos hit the mortgage market in September.”

Coles continued that the movements in the market this week could mean this is the “last boom in mortgage approvals for purchases for a while”.

“At the moment, 40 per cent of mortgages have been withdrawn from sale, and when they come back, rates will be much higher. Given how house prices have risen, and how much bills have soared, when all this is factored into mortgage affordability calculations, it could make it far harder to secure a mortgage,” she noted.

 

Mortgage rates expected to rise

Mark Harris, chief executive of mortgage broker SPF Private Clients, added that next month’s figures would “likely show a significant uptick in the average rate on new mortgages as rates continued to rise”.

“Lenders have been pulling fixed-rate mortgages left, right and centre as swap rate volatility makes them difficult to price. Some lenders are re-pricing higher while others are waiting to see what the market does before relaunching.”

Simon Webb, managing director for capital markets at LiveMore Capital, said that August’s figures were “significant” with the highest number of mortgage applications all year, but the figures already seemed outdated following the past week of economic turmoil.

He explained: “At their most positive, the Bank of England figures show that, despite the rising cost of living, the demand for mortgages and housing remains incredibly strong. While the markets remain so volatile however, much of that demand will remain unfulfilled, and it will be interesting to see how big an impact September’s events have on the mortgage and property markets in the weeks and months to come.“

“With almost half of all mortgages pulled in the past week due to wildly fluctuating costs of funds for lenders, the government urgently needs to work with the Office of Budget Responsibility to produce a fiscally responsible budget that will calm the markets and enable lenders to reprice mortgage products and re-enter the market.”

 

‘Desire to secure sound financial advise will only grow stronger’

John Phillips, national operations director at Just Mortgages said that in spite of external factors, the housing market had showed “real buoyancy” in August, with rises in net borrowing month on month. He added that net borrowing was also above the pre-pandemic average.

He continued: “As the cost-of-living crisis brought real concerns of affordability and interest rates rose, our nationwide network reported homeowners acting with real urgency to get ahead of the game and secure the best deal they could. That urgency and demand is certainly reflected in the figures as mortgage approvals reached their highest level since January.

“Now as the situation changes once again and mortgages hit the national headlines with hundreds of products pulled, but now returning at a higher rate, the desire to secure sound financial advice will only grow stronger.”

Phillips added: “Whether it’s upgrading, downsizing, relocating or remortgaging – especially those with maturing fixed-rates concerned about the rising cost of borrowing, the role of brokers has never been so vital. As a result, they must continue to show real resilience and provide the support homeowners need to navigate this constantly changing landscape.”