Mortgage lending accelerated in June as borrowers responded to falling rates and a slight easing of regulatory restrictions, according to the latest Bank of England Money and Credit figures.
Net borrowing of mortgage debt by individuals rose sharply to £5.3 billion in June, more than doubling the £2.2 billion recorded in May.
Mortgage approvals for house purchases also edged higher, up by 900 to 64,200, while remortgage approvals increased by 200 to 41,800 – the highest level since October 2022.
Gross mortgage lending climbed to £23.9 billion from £20.6 billion in May, with gross repayments also rising to £18.8 billion.
SOFTENING RATES
The upturn in activity coincides with average mortgage rates continuing to soften. The effective interest rate on new mortgages fell slightly to 4.34% in June, while the rate on outstanding mortgages rose marginally to 3.88%.
Consumer credit borrowing also picked up, with households borrowing £1.4 billion in June compared to £0.9 billion in May.
Credit card borrowing accounted for £0.7 billion of the total, up from £0.2 billion a month earlier, while other forms of consumer credit were largely unchanged.
INDUSTRY REACTION
Richard Donnell, Executive Director at Zoopla, says: ‘Demand for mortgages to buy homes increased in June as stable mortgage rates and changes to mortgage affordability encouraged more buyers agree home purchases.
“Zoopla data shows unusually high levels of housing market activity for the early summer with sales agreed up 8% on last year and 11% more buyers in the market.
“While activity levels are higher this isn’t feeding into house price inflation which is slowing. We expect increased housing activity to support demand for mortgages in the rest of the year.”
ALL EYES ON MPC
John Phillips, Chief Executive of Spicerhaart and Just Mortgages, says: “It’s positive to see another monthly increase in mortgage approvals, even if it’s only marginal.
“While the summer period may slow things slightly, it’s encouraging to see some momentum building in the mortgage market, with prospective buyers and movers buoyed by ever-growing innovation among lenders and an increasing spotlight on improving affordability and access to new mortgages.
“Although the jury may still be out on its decision, all eyes will be on the MPC meeting next month and whether we see another cut to the base rate.
“Remortgage activity now at its highest level since 2022 certainly reflects what our brokers are seeing on the ground.
“We knew 2025 would be a busy year for mortgage maturity, whether it’s those facing a rate shock from covid-era deals ending, or rate relief from deals chosen in the wake of the mini-budget.
“Following a drop last month, an uplift in consumer credit borrowing shows we’re not out of the wood just yet with increasing reliance on the likes of credit cards amid stubborn inflation and clear cost of living challenges.”
POSITIVE SIGNAL
Nathan Emerson, Chief Executive of Propertymark, says: “This is a positive sign at a time when there is a poor economic outlook in general and potential tax rises on the way.
“The Chancellor’s recent Leeds Reforms sent a positive signal to the mortgage market, which should encourage many lenders to focus new products and services towards those on lower incomes to help them take their first step onto the housing ladder.”
BUYER AND SELLER HELP
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “Mortgage approvals are always a better indicator than house prices as to market activity over the next few months at least – and these are no exception.
“On the ground, we are seeing the relaxation of borrowing rules helping to support resilience among buyers and sellers, which more competitive mortgage rates are contributing to.
“However, given the over-supply of stock, much of which is priced too high for buyers nervous about the economic outlook, vendors need to be competitive if they wish to attract attention.”
AFFORDABILITY EASING
Jason Tebb, President of OnTheMarket, says: “The market appears to be back on track with approvals for house purchases, an indicator of future borrowing, increasing again in June as confidence remains remarkably steady.
“With the rate on newly-drawn mortgages falling again for the fourth consecutive month, while the rate on outstanding mortgage stock increased slightly, overall there are signs that affordability continues to ease.
“Four base rate reductions from the Bank of England in the past year have helped, along with recently relaxed lending rules and easing of criteria, enabling borrowers to take on bigger mortgages.
“With buyers having to fund higher stamp duty costs since the end of the concession, further rate reductions would provide welcome impetus for the market as we head into the autumn.”
CONSISTENCY IS KEY
Colby Short, Co-founder and Chief Executive of GetAgent, says: “The latest figures suggest that buyer appetites are alive and well and consistency has been key in recent months, as stabilising demand levels have helped to steady the ship.
“While we’ve yet to see the same level of consistency in property transactions, we anticipate that it’s only a matter of time, particularly now that the recent stamp duty deadline has passed, removing one of the key short-term pressures that was restricting buyer activity.”
