The Bank of England (BoE) Money and Credit data for January revealed that mortgage approvals for house purchases increased from 51,506 in December to 55,227 in January.
At the same time, the data showed that the average interest rate on newly drawn mortgages declined by nine basis points to 5.19 per cent in January.
Remortgage approvals were unchanged, falling from 30,917 to 30,885 month-on-month, while the average rate on outstanding mortgages rose by five basis points to 3.41 per cent.
Borrowers lured by lower mortgage rates
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said the declining mortgage rates at the start of the year “lured more buyers back to the market as affordability levels improved”.
She added: “Buyers responded well to January’s heated mortgage price wars, returning in droves as lenders battled to attract new customers and retain existing clients. However, the market has been a little more mixed in February, with rates on many products edging back up as uncertainty reigns around the pace of future interest rate cuts.”
Ashley Webb, UK economist at Capital Economics, said this was the highest level of approvals since October 2022, when mortgage rates spiked following the mini Budget.
He added: “However, increasing interest rate expectations will mean the fall in mortgage rates will now pause, and could partially reverse. Therefore, a full recovery to 65,000 approvals per month – the norm before the pandemic – is unlikely before the end of the year.”
Emma Cox, managing director of real estate at Shawbrook, said: “January’s rise in mortgage approvals reflects the increasing confidence returning to the market.
“Falling mortgage rates and lower borrowing costs have encouraged a flurry of activity as buyers race to secure favourable deals. However, mortgage rates are beginning to creep back up and cuts to interest rates may not materialise as soon as previously predicted.”
Gross mortgage lending falls
Gross mortgage lending contracted from £17.2bn in December to £16.9bn in January, and gross repayments fell over the same period from £19bn to £18.5bn.
People made net mortgage repayments totalling £1.1bn in January, up from £900m the month before. The BoE said the annual growth rate for net mortgage lending was in the negative, at 0.2 per cent, for the first time since records began.
Haine said the drop in net mortgage lending, with repayments bigger than new mortgages issued, was a sign that “people strived to pay back their debt amid high borrowing costs”.
