Gross mortgage lending as well as approvals for both house purchases and remortgages ticked up in November.
This suggested a return in consumer confidence, analysis from the Bank of England showed.
Both mortgage approvals and gross lending rose in November. The Bank of England Money and Credit data for the month showed that gross mortgage lending rose from £15.9bn in October to £16.6bn in November.
Gross mortgage repayments fell from £17.2bn to £25.6bn over the same period.
Net mortgage lending, representing the rise and fall in outstanding mortgage balances, came to zero in November, compared to £100m of net repayments in October. Annually, this was a 0.3 per cent rise. The central bank said this was the lowest annual growth rate since the series began in 1994.
Karen Noye, mortgage expert at Quilter, said the net mortgage figures showed that the cost of living crisis had caused “significant shifts in the mortgage market”.
She added: “For example, a year ago in November 2022 we saw £4.4bn in mortgage lending, now fast forward a year and that has reduced to net zero.
“This will be largely down to higher interest rates, which have deterred potential buyers and subdued the property market.”
Mortgage approvals on the up
There were 50,067 mortgages approved for house purchase in November, which was an increase on the previous month’s total of 47,888. This was the highest level of approvals since June 2023, when the total was 54,016.
Approvals for remortgaging came to 26,988 in November, which was higher than the last month’s figure of 24,045.
Mark Harris, chief executive of SPF Private Clients, said the base rate being held at 5.25 per cent for the second time in November “gave borrowers hope that rates may have peaked”.
He added: “Fast forward to a new year and we find ourselves in the midst of a mortgage price war. With HSBC launching a five-year fix at 3.94 per cent today, following Halifax’s reductions of up to 0.83 percentage points on Tuesday, the gloves really are off.
“With 2023 being a disappointing year in terms of amount of business done, lenders are keen to get this year off to a cracking start. It is great news for borrowers who have struggled with affordability over the past few months. Although borrowers remortgaging this year will still see an increase in their payments, the pain will not be as bad as it could have been.”
Reece Beddall, sales and marketing director at Bluestone Mortgages, said the rise in approvals hinted at a “gradual recovery from the turbulence in the mortgage market”.
Beddall added: “Lenders swiftly reducing rates in the first week of 2024 is an additional welcome relief for borrowers nationwide, no doubt easing some of their financial concerns.”
Borrowers still face higher interest rates
The effective interest rate on newly-drawn mortgages rose by nine basis points to an average of 5.34 per cent in November. The average rate on the outstanding stock of mortgages also increased, with a seven basis point rise to 3.27 per cent.
Alice Haine, personal finance analyst at Bestinvest, said this did not account for the recent rate reductions seen in the market would not “fully ease the pain for the roughly 1.6 million* existing borrowers with cheap fixed rate deals expiring this year”.
She continued: “They still face a heavy jump in interest payments when they switch onto a new product, with the only comfort that the situation could have been much worse.
“The full effect of the Bank of England’s 14 rate rises in under two years is still yet to be fully realised. The rate on the outstanding stock of mortgages saw a seven basis point increase to 3.27 per cent as more people switched onto more expensive deals, highlighting how many borrowers are yet to reach the end of cheaper deals taken out before the rapid rate hiking cycle began.”
John Phillips, CEO of Spicerhaart and Just Mortgages, agreed and said: “While we are seeing positive progress on rates – with more good news already this year, we cannot overlook the clear affordability challenges facing borrowers. We mustn’t forget the more than a million homeowners still set to remortgage this year too.
“Rates still remain higher than many are used to and while competitive pricing among lenders is helping, the hope is that a base rate drop will kick in later in the year and help with the heavy lifting.”
