Mortgage borrowing rises as rates fall

Mortgage borrowing rises as rates fall
Christina Hoghton
Written By:
Christina Hoghton

Mortgage approvals for house purchases rose from 49,300 in November to 50,500 in December, said the Bank of England.

Approvals for remortgaging also rose, increasing from 25,700 in November to 30,800 in December.

Gross lending continued to increase, from £16.4 billion in November to £17.2 billion in December.

But the Bank said that its annual growth rate for net mortgage lending was flat for the first time since the series began in March 1994.

Laura Suter, director of personal finance at AJ Bell, said: “The outlook for the mortgage market isn’t quite as bleak as it has been, with approvals for house purchases rising slightly in December. Clearly the headlines being filled with speculation of interest rate cuts later this year, plus a drop in mortgage rates, has spurred some buyers back into action who had previously been put off.”

Sarah Coles, head of personal finance, Hargreaves Lansdown, added: “There was some positive news on mortgage approvals, but it’s hardly a borrowing bonanza. We can celebrate approvals pushing through 50,000, and there are some signs that January has seen another bounce, but we’re still a long way from a healthy market.
“Approvals have to be seen in the context of the fact that excluding the start of the pandemic, we had been used to approvals of over 60,000 a month for the best part of a decade, and we’re still well short of this. The amount outstanding on mortgages at the moment is roughly the same as a year ago. It’s the first time this hasn’t grown annually since the Bank started measuring this in 1994.”

Rates down

The ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages fell by six basis points to 5.28 per cent in December. This marks the first drop since November 2021, said the Bank of England.

Suter added: “This is a big relief for anyone who is looking down the barrel of their mortgage deal coming to an end – average new mortgage rates dropped for the first time in three years. The Bank of England’s data shows a drop in the interest rate paid on new mortgages by six basis points in December.”

Coles said: “We can’t get carried away. It’s still a buyers’ market, and Zoopla says sellers are still having to discount asking prices significantly in order to secure a sale.

“Looking further ahead, the fact we’re teetering on the edge of recession means there’s every chance prices will continue to fall throughout the year. However, for anyone who has gone months without a viewing – let alone an offer – a bit more activity brings some hope.”