Wednesday, February 21, 2024
Finance

UK mortgage approvals surge in October

Mortgage Advice Bureau

Banks and building societies authorised 47,383 home loans, up from 43,675 in September and the most since July, the BoE said on Wednesday

UK mortgage approvals increased for the first time in four months in October as cheaper borrowing costs attracted buyers back into the housing market.

Banks and building societies authorised 47,383 home loans, up from 43,675 in September and the most since July, the BoE said on Wednesday. The figure was well above the 45,300 economists were anticipating.

The figures chime with proof from real estate agents that optimism is slowly returning to the housing market. Mortgage costs, which have tripled since the beginning of 2022, are now declining as the Bank of England signals it is done hiking interest rates in its fight against inflation.

Economists said activity in the housing market may be over its low point after the Bank of England stopped its hiking cycle.

The average two-year fixed mortgage rate is presently at 6.06%, down from around 6.9% at the beginning of August, as per Moneyfacts data. Nevertheless, borrowing costs on home loans are still considerably higher than their levels before inflation took off, meaning many households are still facing a painful hit when they refinance.

With mortgage rates dropping, the increase in mortgage approvals in October confirms that the trough in mortgage approvals is behind us, said Imogen Pattison, economist at Capital Economics.

But with mortgage rates unlikely to drop much below 5% until H2 2024, mortgage demand is likely to remain weak by normal standards, Pattison said.

It is the latest data to point to the housing market rebound.

Data from building society Nationwide showed house prices climbing 0.9% in October, the second successive monthly rise. Other surveys have indicated that buyers and sellers are gradually returning to the market.

The Bank of England data showed that households repaid £50 million of mortgage debt in October, following a repayment of £961 million in September.

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