Mortgage approvals for house purchases edged higher in December, signaling renewed confidence in the housing market, according to the latest Bank of England data released yesterday.
Net mortgage approvals rose to 66,500 last month, reversing November’s decline of 2,300. However, remortgaging approvals dropped for the second consecutive month, falling by 700 to 30,500.
Meanwhile, net mortgage borrowing saw a significant jump, rising by £1.0 billion to £3.6 billion in December – suggesting that buyers and homeowners are taking advantage of market conditions ahead of potential shifts in interest rates.
The uptick in mortgage approvals comes at a critical moment, just ahead of the Bank of England’s next Monetary Policy Committee meeting.
CONFIDENCE BOOST
A rise in approvals and borrowing could be seen as a sign of strengthening consumer confidence, potentially influencing the Bank’s rate decisions.
The modest increase in home purchase approvals suggests that buyers may be moving early to lock in rates, anticipating future cuts that could drive up property prices. Conversely, the continued decline in remortgaging activity indicates that many homeowners are waiting in the hopes of securing even lower rates if the Bank of England eases monetary policy further.
With growing optimism in the housing market, all eyes are now on the Bank’s next move – and whether further rate adjustments could drive even stronger momentum in the months ahead.
But as Mortgage Soup reported yesterday, The Bank has already warned that easing mortgage lending restrictions could lead to higher home repossessions and may not effectively support first-time buyers.
INDUSTRY REACTION
Arjan Verbeek, Chief Executive of mortgage lender Perenna, says: “After a fall in mortgage approvals and net lending in November, it is reassuring to see sign of activity in the property market.
“With the Chancellor’s focus now firmly on enabling growth and innovation, the mortgage industry will be waiting with bated breath to see what regulatory shifts are on the horizon to drive this activity even further.
“If we are going to have any hope of doing that, we have to improve the ability of first time buyers to access the market as well as downsizers who are putting off moving for fear of being hit with a big stamp duty bill they simply can’t afford.
“As it stands, the structure and short-termism of the UK mortgage market simple isn’t up to this need.”
MORTGAGE SOLUTIONS
And he adds: “To lead the UK back to a nation of homeowners, it is crucial that lenders are able to develop mortgage solutions, from 0% deposit mortgages to long-term fixed rate solutions that safely meet modern consumer demand.
“The potential review of the LTI cap is a promising step in the right direction: its removal, combined with a review into broader assessment criteria, would be a gigantic leap forwards in improving access to the housing market for all.”
UPBEAT START
Nathan Emerson, Chief Executive of Propertymark, says: “Many people are likely to have been working with urgency to get their mortgages approved to help ensure they can complete ahead of stamp duty threshold increases in England and Northern Ireland before the start of April.
“It has been an upbeat start to the year overall and very much spurred on by some lenders reducing rates by up to 0.35% across many of their fixed-rate re-mortgage products. Our Propertymark member agents have also in turn also witnessed an uplift of around 10% in activity from prospective buyers.
“Depending on what happens with inflation as the year progresses, hopefully the Bank of England will look to reduce the base rate further, which will likely translate into more affordable mortgage products and further stimulate the housing market.”
SHOT IN THE ARM
Jason Tebb, President of OnTheMarket, says: “With approvals for house purchases, an indicator of future borrowing, picking up slightly in December following November’s fall, market stability and buyer confidence continues to be remarkably steady.
“While affordability remains an issue for many buyers, there is encouraging talk of further base-rate reductions this year.
“We saw how the two rate cuts in August and November boosted buyer and seller confidence and further reductions should provide another shot in the arm for the market, improving all-important activity. This, combined with the end of the stamp duty concession in March, points to a brisk spring market.”
EXCELLENT POINTER
Jeremy Leaf, north London estate agent and a former RICS Residential Chairman, says: “Mortgage approvals always provide an excellent pointer for direction of travel for the market. These figures are particularly interesting, continuing the up a bit, down a bit, trend from last month, hot on the heels of the disappointing Budget.
“On the ground, activity is finding a new level. We are seeing more enquiries but buyers remain cautious with no significant changes expected until perhaps a drop in interest rates next month.”
