Mortgage approvals for house purchases rose by 2.4% to 50,500 in December from the month before, Bank of England data shows, as home loan rates eased. This was the third month in a row approvals lifted.
Remortgage approvals jumped 19.8% to 30,800 over the same period, according to the central bank’s latest Money and Credit report.
It adds that the ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages fell by 6 basis points to 5.28% in December. The first fall since November 2021.
The data comes after the Monetary Policy Committee held rates at a 15-year high of 5.25% in November as the central bank bids to bring inflation back under its 2% target, currently at 4%.
The central bank’s report adds that borrowers repaid £800m of mortgage debt in December compared to net zero in November.
It says: “The annual growth rate for net mortgage lending was flat for the first time since the series began in March 1994, a new series low.”
Bluestone Mortgages sales and marketing director Reece Beddall points out: “The increase in mortgage approvals at the close of 2023 reflects what we saw on the ground, where buyers became increasingly more confident in the market.
“This was being driven by a decline in inflation, the Bank of England maintaining interest rates, and lower mortgage rates compared to earlier in the year.
“We are seeing this momentum into January, marked by heightened competition among lenders as they continue to cut rates, boosting buyers’ confidence.”
Air chief executive Paul Glynn says: “December is traditionally a slower period in the property market. We can anticipate a significant uptick in the January data next month after what has been a buoyant start to 2024 for the housing market.
“Come next month, we may see some notable differences, especially as the increased competition between lenders begins to open new windows of opportunity.”
Octane Capital chief executive Jonathan Samuels adds: “Homebuyers are continuing to grow in confidence, buoyed by a reduction in mortgage rates in recent months.
“However, these mortgage rate reductions were based on previous expectations across the swap market that the Bank of England will reduce the base rate this week.
“These expectations have been changing in recent weeks and we’ve seen swap rates start to creep up based on the likelihood that the base rate will remain at 5.25% for the immediate future.
“As a result, mortgage approvals have climbed, but not at the rate forecast, and we anticipate that should mortgage rates start to climb again in February it could further dampen the enthusiasm that has been shown by buyers in recent months.”
Saffron for Intermediaries head of business development, Tony Hall points out: “The mortgage market is always slow in December, with all sides taking a well-earned festive break, but activity has undoubtedly ramped up since and I’m optimistic for the year ahead.
“The rates war started to slowly brew in the final weeks of last year and has boiled over in January, launching the mortgage market into the headlines.
“The competition on pricing has drawn a lot of previously hesitant or outpriced buyers back into the market, and Zoopla currently reports that demand is up 12% on this time last year – in the capital, it’s a whopping 21% higher.
“There are a lot of variables of course, and key dates to look out for – not least the interest rate decision this Thursday and Budget in just over five weeks – but at the moment, the 2024 outlook is positive.
“Lots of lenders relied on huge refinance activity last year and will be keen to continue tinkering with their product offerings in order to boost business on the purchase side of the market.”
