Mortgage borrowing picked up in February with lending to households rising above recent averages despite approvals remaining slightly subdued.
Latest figures from the Bank of England show net borrowing of mortgage debt increased to £4.8bn in February, up from £4.2bn in January and above the previous six-month average of £4.5bn.
Mortgage approvals for house purchases also rose, climbing to 62,600 in February from 60,200 the month before.
However, approvals remain just below the recent six-month average of around 63,500, suggesting demand has yet to fully recover.
RATE UNCERTAINTY
Remortgaging activity saw a stronger uptick, with approvals increasing to 41,200 from 38,500 in January, pointing to continued borrower focus on securing new deals amid ongoing rate uncertainty.
Consumer borrowing also edged higher, with individuals borrowing £1.9bn in February, slightly up from £1.8bn the previous month and above the recent average. Within this, credit card borrowing fell to £0.8bn, while other forms of lending, including personal loans and car finance, rose to £1.2bn.
Elsewhere, businesses reduced overall borrowing compared to January. Private non-financial corporations borrowed £2.6bn in February, down from £5.1bn the previous month, although bank lending within that total increased to £4.3bn.
INDUSTRY REACTION
Nathan Emerson, CEO of Propertymark, says: “With the figures reflecting February’s activity, it’s encouraging to see sustained momentum across the mortgage market during this period. This suggests that improving affordability and greater lender confidence were beginning to translate into real buyer activity.
“However, the outlook is far from certain. Escalating geopolitical tensions are likely to feed through into inflationary pressures and base rate expectations, which could quickly dampen borrowing conditions and slow approval volumes in the months ahead.
“As a result, both buyers and sellers are navigating a more complex landscape, where financial due diligence and timing are becoming increasingly critical to decision-making.
“Nonetheless, the housing market remains a cornerstone of the UK economy, and a return to greater stability and confidence will be key to maintaining transactional momentum as the year progresses.”
RESILIENT MARKET
Jason Tebb, President of OnTheMarket, says: “Approvals for house purchases – an indicator of future borrowing – increased in February as buyers and sellers put the inactivity and uncertainty created by the run-up to the Budget behind them and pressed ahead with their plans.
“Of course, these figures reflect activity before the outbreak of conflict in the Middle East and demonstrate the ongoing resilience of the housing market.
“Last year’s rate reductions had a positive impact on activity, helping ease affordability, although expectations of further reductions have now been put on hold amid concerns of rising inflation.
“Nevertheless, our own property sentiment index indicates an impressive level of resilience and optimism among buyers and sellers. Even against a backdrop of ongoing political and economic turbulence, attitudes towards affordability, property values and moving home remain remarkably buoyant.”
CONFIDENCE HIT
Jeremy Leaf, north London estate agent and a former RICS Residential Chairman, says: “Mortgage approvals are always a reliable indicator of housing market activity over the next few months and are particularly interesting this time around as they show a reversal of the downwards trend for approvals over the past few months.
“Prospective purchasers were clearly happy to continue their interest in buying property with activity improving gradually.
“However, as recent events in the Middle East have continued so we have seen in our offices the inevitable impact on confidence, particularly regarding mortgage costs and inflation.
“Needs-driven buyers are still active, but overall numbers have dipped. So far the overwhelming majority of sales are proceeding although nagging concerns about how far and how fast costs are likely to rise in the short term at least are continuing.”
ACTIVE BUT SELECTIVE MARKET
John Phillips, CEO of Spicerhaart and Just Mortgages, says: “The figures paint a nuanced picture. One the one hand, a rise in net borrowing to £4.8bn points to buyers continue to push on with transactions.
“On the other hand, approvals, while up on the month, remain below trend, showing a level of hesitation that hasn’t fully disappeared.
“These figures reflect a market that’s active, but more selective.
“Demand hasn’t gone away; it’s become more deliberate. Those who need to move are getting on with it, while others are taking longer to commit as they weigh up affordability and timing.”
RATE PRESSURE
Simon Gammon, Managing Partner, Knight Frank Finance, says: “Mortgage lending remained relatively resilient through February, although the data predates the escalation in the Middle East.
“Since then, borrowing costs have risen sharply, which will begin to weigh on activity in the months ahead. The cheapest fixed rates are now around 4.5%, up from roughly 3.5% in February, with further repricing still underway. It is increasingly plausible that leading fixed rates settle closer to 5% in the near term, representing a significant squeeze on borrowers.
“While much of the upward pressure reflects the energy shock linked to the conflict, there is also a clear behavioural response, with borrowers rushing to lock in deals before rates move higher. This risks overwhelming lenders and prompting further repricing, reinforcing a feedback loop in which urgency on the demand side adds to upward pressure on rates.”
ENCOURAGING PICTURE
Richard Merrett, Managing Director of mortgage adviser Alexander Hall, says: “The current picture remains encouraging, particularly when you compare current market conditions to a year ago.
“Rates are lower, affordability has improved, and the average buyer is now considerably better off when it comes to the cost of their mortgage repayments.”
