The recent rise in mortgage lending is being driven by a significant increase in remortgage activity, according to the latest analysis of Bank of England data.

Overall mortgage approvals rose by an average of 7.7% a month between October and December 2024. This follows falls in lending activity over the summer.

But a closer look at this lending shows that remortgage approvals increased by an average of 14.7% a month over this period, compared to a more modest rise of 4.6% of mortgages to fund home purchases. 

This analysis was undertaken by specialist lenders Octane Capital, based on the Bank of England’s mortgage approval data. 

Despite this uptick in activity, approvals remain significantly lower when compared to previous years. In early 2022 mortgage approvals regularly  topped 130,000 per month. In contrast there were just over 70,000 approvals in September. 

The recovery in mortgage activity seen towards the end of last year has been driven by more competitive pricing.

Headline inflation figures in the UK fell in November, to 3.9% – lower than initially was forecast. This raised expectations the BoE was more likely to lower the base rate in 2024, rather than raise it. As a result towards the end of 2023 swap rates dropped which offered lenders access to cheaper funding options, enabling them to cut rates. 

However Octane says it remains to be seen if this trend will continue. Inflation unexpectedly edged upwards again in January, and a number of lenders have increased the cost of their fixed-rate mortgages. This could have a knock on effect on demand.

Octane Capital CEO Jonathan Samuels says: “Mortgage approvals showed positive signs of recovery towards the end of last year, however the market is by no means back to full strength.

“Much of this increase has been driven by remortgage activity from existing homeowners keen to lock in a new deal while rates have dropped and the number of people taking out loans to fund new home purchases remains sluggish.

“With inflation showing a mixed picture it could take a long while for the Bank of England to cut the base rate this year, which could result in the market treading water in terms of activity for a good few months yet.”