Mortgage approvals in the UK showed a rebound in February after hitting a two-year low in January, signaling a brief recovery in the property market before global uncertainty from the Iran conflict weighed on confidence.
According to the Bank of England, approved mortgages for house purchases rose to 62,600 in February, up from 60,200 the previous month. While this represents an improvement, the figure remains slightly below the six-month average of around 63,500.
Remortgaging activity also picked up, rising from 38,500 in January to 41,200 in February, reflecting a modest resurgence in lending despite the wider market disruption.
Richard Merrett, managing director of Alexander Hall, commented: “The current picture remains encouraging, particularly when you compare current market conditions to a year ago. Rates are lower, affordability has improved, and the average buyer is now considerably better off when it comes to the cost of their mortgage repayments.”
Jonathan Samuels, CEO of specialist lender Octane Capital, said: “We’ve seen a strong start to the year where mortgage market activity is concerned, with approvals once again starting to climb and a stronger rate than anticipated.
“This improving buyer sentiment is being driven by a mortgage landscape that is far more favourable for homebuyers than it was a year ago and this remains the case despite developments in the Middle East in recent weeks.
“Whilst the Iran conflict has had an impact on mortgage sector confidence to an extent, it’s unlikely to make a lasting dent in domestic sentiment and, whilst we may see a momentary dip in approval activity in the next set of figures, the outlook for the year ahead remains wholly positive.”
Simon Gammon, managing partner, Knight Frank Finance, added: “Mortgage lending remained relatively resilient through February, although the data predates the escalation in the Middle East. Since then, borrowing costs have risen sharply, which will begin to weigh on activity in the months ahead. The cheapest fixed rates are now around 4.5%, up from roughly 3.5% in February, with further repricing still underway. It is increasingly plausible that leading fixed rates settle closer to 5% in the near term, representing a significant squeeze on borrowers.
“While much of the upward pressure reflects the energy shock linked to the conflict, there is also a clear behavioural response, with borrowers rushing to lock in deals before rates move higher. This risks overwhelming lenders and prompting further repricing, reinforcing a feedback loop in which urgency on the demand side adds to upward pressure on rates.”