Banks and building societies authorised 50,459 home loans in December, up from 49,313 the earlier month, the BoE said on Tuesday
UK mortgage approvals jumped to the highest level in six months in a further sign that declining borrowing costs are bringing buyers back to the housing market.
Banks and building societies authorised 50,459 home loans in December, up from 49,313 the earlier month, the BoE said on Tuesday. At the same time, consumers took out an extra £1.2 billion in unsecured debt. Both figures were marginally below economists’ expectations.
The findings add to evidence that the housing market is turning a corner after avoiding a crash in 2023 that had been widely forecasted.
Cheaper mortgages fuelled by a price war among lenders is bringing buyers off the sidelines, while moderating inflation is bolstering consumer confidence.
The effective’ interest rate – the actual interest paid – on newly drawn mortgages dropped by 6 bps to 5.28% in December, the first decline since November 2021, the Bank of England said. As per Moneyfacts, the average 2-year fixed mortgage rate has dropped to 5.18%, down from nearly 7% last summer but still well above levels in 2022.
Nevertheless, the average rate on the total stock of mortgages kept increasing, and stays below the rate for newly drawn home loans, as most homeowners remain on fixed deals agreed at lower rates.
Lenders including Nationwide Building Society and HSBC expect prices to stabilise in 2024 as financial markets bet on the Bank of England cutting interest rates from the middle of the year.
A major headwind facing the housing market is the scale of mortgage refinancing that has yet to take place. Nearly 1.5 million borrowers face an extra £1,800 annual bill on average this year as their fixed-rate deals expire, as per the Resolution Foundation think tank.