Mortgage approvals rose despite the “effective” interest rate on newly drawn mortgages edging up to 4.84% in August, up from 4.81% in July
UK lenders approved 64,900 mortgages in August, according to the Bank of England, marking the highest number since the “mini-budget” crisis.
Mortgage approvals rose despite the “effective” interest rate on newly drawn mortgages edging up to 4.84% in August, up from 4.81% in July. It marked the highest level in two years, according to the Bank of England’s Money and Credit report.
The rise in approvals indicates a revival in Britain’s housing market, which has gained momentum following the BoE’s decision to reduce interest rates in August for the first time since 2020.
In August, net mortgage approvals for house purchases increased from 62,500 in July, while approvals for remortgaging also saw an increase from 25,200 to 27,200. This surge follows a period where mortgage lenders reduced rates in response to the BoE’s interest rate cut.
Andrew Montlake, MD at mortgage adviser Coreco, said: So much for the summer holidays slowing down mortgage demand. Buyers flooded the mortgage market in August, driven by lower rates and a desire to secure deals before potential market turbulence in the upcoming budget. It looks like we are in for a busy end to 2024.
Earlier Monday, mortgage lender Nationwide reported that British house prices in September rose by 3.2%. This was the most significant annual increase since November 2022.
Alice Haine, personal finance expert at Bestinvest, said UK households are still under pressure: Improving mortgage rates and strong income growth have eased the affordability challenge for some buyers in recent months with the BoE’s interest rate cut at the start of August and prospect of at least one more rate cut to come this year energising the residential property market.
This has not fully filtered through to the mortgage market just yet, as the effective rate on newly drawn mortgages increased by 3 bps to 4.84% in August, highlighting that the financial pressures of the last few years have not eased entirely for borrowers, she said.