The number of mortgages approved for home buyers has jumped to its highest level since the month the mini-budget was delivered under then-prime minister Liz Truss.

The Bank of England recorded 62,000 approvals for residential property purchases in July – the highest total since 65,100 were recorded in September 2022.

Approvals have improved as mortgage rates edge down, following the Bank of England’s decision to cut the base rate by 0.25% to 5% last month.

The uptick in mortgage approvals in July suggests that housing activity will continue to trend upwards over the rest of this year

The Bank’s Money and Credit report said house purchase approvals increased from 60,600 in June.

Hina Bhudia, partner, Knight Frank Finance, said: “Activity improved through the summer months, despite the fact they tend to be quieter, and autumn should be very busy.

“Sentiment has transformed relative to this time last year, when there was a real sense of fear among homeowners. Last July, borrowers had heightened concerns over affordability, now more and more are asking whether they can afford to stretch themselves and purchase a bigger property.

“The market is still extremely competitive among lenders. We’re still seeing small, marginal cuts to mortgage rates, which should pick up in September when many people return to work. Market leading two year fixes at 75% LTV can be found at around 4.4%, while the five year fixes at 75% stand at 4.04%. Most borrowers are weighing up two year fixes or trackers, which are a full percentage point more expensive than the best two year products.”

Charlotte Nixon, mortgage commentator at Quilter, remarked: “The latest data on UK mortgage borrowing and property transactions offers an interesting snapshot of the current state of the housing market, which looks to be in recovery mode after a turbulent few years. In July, net borrowing of mortgage debt increased to £2.8 billion, marking the highest level since late 2022. This rise points to a resilient demand for property, even as the market faces broader economic uncertainties from high interest rates. It’s clear that many buyers are seizing opportunities, likely driven by a mix of stabilising market conditions and the anticipation of potential shifts in interest rates. The proliferation of 4% mortgage deals also helps boost demand.

“Mortgage approvals for house purchases also climbed to 62,000 in July, the highest figure since September 2022 reflecting a growing confidence among prospective buyers, suggesting that more people are willing to enter the market despite ongoing economic pressures.

“The provisional figures on UK residential transactions provide further context to these trends. The seasonally adjusted estimate shows a slight dip in residential transactions for the second consecutive month, down less than 1% from June. This modest decrease aligns with the typical mid-summer slowdown, as many take a break from house hunting during the holiday season.”

Joe Pepper, UK Chief Executive Office at PEXA, added: “July’s rise in mortgage approvals is encouraging news for the housing market, and likely an early sign of better things to come. With a fresh UK government mandate to improve the property market, borrowers are seeing the light at the end of the tunnel and gaining confidence.

“Having now seen the first interest rate cut from the Bank of England, we are likely to see this trend continue in August’s figures – we are already seeing major lenders slash the prices of their mortgage deals that will undoubtedly drive up the number of those looking to buy, particularly those looking to get on the property ladder for the first time. As such, we expect a flurry of mortgage activity in the coming months.

“Although this is encouraging for the market and the UK economy more broadly, there remains an underlying concern in that the infrastructure sat behind the market is not equipped to handle this demand. Investment into the digitisation of the remortgage process is needed to speed up transaction times and free up much needed capacity for conveyancers in order to cope with such heightened activity.”