Net borrowing of mortgage debt by individuals increased to £4.8bn in February, from £4.2bn in January, the Bank of England Money and Credit data reveals.
The rise is February is also above the previous six-month average of £4.5bn.
Data also shows that net mortgage approvals for house purchases increased to 62,600 in February, from 60,200 in January, below an average of around 63,500 over the previous six months.
Approvals for remortgaging increased to 41,200 in February from 38,500 in January.
Net borrowing of consumer credit by individuals slightly increased to £1.9bn in February, from £1.8bn in January.
It was also slightly above the previous six-month average of £1.8bn.
Within this, net borrowing through credit cards was £0.8bn in February, down from £0.9bn in January.
Net borrowing through other forms of consumer credit increased to £1.2bn in February, up from £0.9bn in January.
Commenting on the latest data, Bestinvest by Evelyn Partners personal finance analyst Alice Haine says: “February’s savings and credit figures feel like a somewhat outdated picture, as they predate the sharp rise in global energy prices triggered by the conflict in the Middle East which began at the end of the month.”
“Even so, the data presents a time when savers and borrowers were feeling slightly more hopeful, with mortgage approvals edging up and savings increasing, though consumer borrowing was also on the rise – signalling that some household finances were already under strain before the latest geopolitical shock.”
“February’s optimism was driven by markets expecting a seventh rate cut in the near term, supported by easing inflation – which held at 3.0% – alongside rising unemployment and subdued economic growth. Those hopes have now been dashed, and instead savers and borrowers have a far more uncertain outlook to contend with.”
“The Bank of England has already responded by holding interest rates at 3.75% – with an outlook that markets interpreted as quite hawkish – and there is growing concern that rate hikes are on the horizon if inflationary pressures intensify as a result of the Middle East conflict.”
“UK mortgage approvals edged up in February, suggesting that buyers were less hesitant to proceed with purchases amid improving affordability – the result of easing inflation and softer mortgage rates – and greater clarity on property taxation following the Autumn Budget.”
“The effective rate on newly drawn mortgages increased to 4.10% in February from 4.09% in the previous month amid shifting interest rate expectations.”
“The effective rate on the outstanding stock of mortgages also rose to 3.95%, up from 3.90%. Since then, rapid changes in inflation and interest rate expectations have pushed average two- and five-year fixed rates even higher, creating more pain for households hoping for things to get better and reducing mortgage choice as some lenders withdraw products altogether.”
Quilter mortgage expert Karen Noye explains: “Given this data captures February, and March saw a rapid reversal of any real progress that had been made in terms of mortgage rates and buyer confidence, we can expect this positive shift to be very short lived.”
“Prospective home buyers and movers who were holding out for lower interest rates will have had their hopes dashed since the start of the Iranian conflict. The Bank of England had been expected to make at least one or two cuts this year, but now it seems a hold or even an uptick is more likely.”
“Lenders had been offering slightly more competitive rates prior to the start of the war, and this is reflected in today’s figures which show the effect rate on newly drawn mortgages was 4.10% in February, roughly in line with the 4.09% seen in January. However, this will have changed considerably in the month since.”
