Mortgage approvals increased in March to their highest level since Liz Truss’s mini-budget left the property market in chaos in 2022.
Fresh data from the Bank of England shows that 61,300 borrowers were approved for a home loan, up from 60,500 in the previous month. The number is broadly in line with City analysts’ expectations.
Consumers borrowed £20.1n to finance a property acquisition in March, up from the £18.6bbn of additional mortgage borrowing in the previous month and the highest jump since February 2023.
Separate data published by HM Revenue & Customs revealed that an easing in financing conditions had helped to lift property sales. Non-seasonally adjusted transactions rose to 86,980 in March from 72,740 in the previous month. The seasonally adjusted figure was 84,200.
Industry reactions:
“Purchase activity has been strong, with many more options now available for first time buyers. We expect the spring and summer months to be more positive and the market to pick up further. The recent repricing we’ve seen shouldn’t put buyers off, as there are still mortgage deals available at rates much lower than this time last year. For new buyers, or those with a deal expiring, now is the time to get mortgage ready by speaking with a broker.”
Peter Stimson, Head of Product at the mortgage lender MPowered Mortgages, commented: “The uncomfortable truth is that mortgage interest rates have shifted from driving the property market forward to holding it back.
“The flurry of interest rate cuts made at the start of 2024 made mortgages cheaper and kick-started demand from many of the would-be homebuyers who sat out 2023.
“The number of net mortgage approvals surged 17% between December and February as demand from buyers took off. But last month the growth slowed sharply, with approvals for property purchases inching up just 1.3%, and the number of remortgages falling, in March.
“Separate data out today from the Land Registry shows the number of homes changing hands in March increased only slightly – up just 1% compared to February.
“The reason for both slowdowns is the same – the cost of borrowing has picked up steadily since January.
“With several high street lenders announcing further interest rate rises last week and yesterday, the average interest rates being offered by Britain’s biggest lenders are now higher than they were at the turn of the year.
“If the mortgage market started the year with its foot on the accelerator, it’s now moved back to the brake pedal.
“With the Bank of England unlikely to cut its Base Rate until June at the most optimistic, progress on both new mortgage lending and home sales is likely to be modest at best for the next few months.
“Many lenders are competing hard on the rates they offer, both to new borrowers and to those remortgaging, but for mortgages to get significantly cheaper we need much greater clarity from the Bank of England on when it will be ready to relax its interest rate stance.”
Adam Oldfield, chief revenue officer at Phoebus, remarked: “The general feeling that the mortgage and housing markets have picked up in the first quarter of this year is borne out by today’s Bank of England’s Money and Credit figures for March. Last year was challenging for many, but the highest number of net approvals since September shows confidence rose at the start of this year. Residential transactions rising by a fifth month-on-month indicates potential pent-up demand for people to stop sitting on the fence and move on with their lives.
“Whether this recovery will continue into Q2 with swap rates bouncing back up is yet to be seen however. While affordability was improved with interest rates in March having dropped 17 basis points, rising swap rates will already have eaten into much of this in April, influenced by the uncertainty of a UK general election looming and the wider global picture continuing to look unsettled.”
John Phillips, CEO of Spicerhaart and Just Mortgages, added: “The positive momentum we’ve been seeing in the market certainly continued in March with the highest number of net mortgage approvals since September 2022. This in spite of the fact of another disrupted month with an early Easter and half terms across the country. It certainly mirrors our own experiences on the ground with strong demand for both appointments, but also bookings for valuations within our estate agency branches.
“The wheels of the mortgage market are certainly moving, as evidenced by a further increase in monthly property transactions – also released today. This is all hugely positive – we just have to hope the recent unsettling on swap rates and subsequent rise in mortgage rates across the market doesn’t upset the apple cart. This could certainly impact the downward trend on the ‘effective’ interest rate paid by borrowers, which improved further in March.
“Nonetheless, it further proves the point as to why brokers are so important when trying to navigate the market. Maintaining this growing consumer confidence and positive momentum requires brokers to remain proactive and continue to offer that five-star service. While we cannot influence swap rates or the monetary policy of the Bank of England, we can continue to throw our arms around our clients and provide all the necessary support to help them push ahead with plans.”
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