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Sharp rise in mortgage approvals in March

Christina Hoghton
Written By:
Christina Hoghton
Posted:
Updated:
05/05/2023

Green shoots are appearing in the housing market, but the cost of living pressures are still proving a challenge

Mortgage approvals for house purchases rose significantly to 52,000 in March, from 44,100 in February, according to the Bank of England.

The figures are considered a good indicator of future mortgage borrowing.

However, net mortgage borrowing fell to zero in March, which was the lowest level since July 2021 and, if you exclude the pandemic, the lowest since June 2011.

Alice Haine, personal finance analyst at Bestinvest, said: “Mortgage approvals rose for the second consecutive month in March, a reflection of buyers returning to the market amid improving consumer confidence and growing signs that inflation is on the retreat.

“However, with net borrowing of mortgage debt falling to net zero in March, the lowest level since June 2011, consumer appetite for house buying may be back but people are buying smaller, cheaper homes to ensure the purchase is actually affordable.

“Lenders may be more amenable, with far more products available to choose from, but affordability continues to be a major challenge for many buyers who are now forced to downsize their buying aspirations to get their deal across the line as the effects of significantly higher borrowing costs than a year ago, high inflation and falling real wages eat into their disposable incomes.”

Sarah Coles, head of personal finance at Hargreaves Lansdown, added: “The growth in mortgage approvals is due in no small part to falling mortgage rates – which have been creeping south since the peak in October last year. They’re still significantly higher than before the rate rises kicked off, and the falls took a break in March after the surprise inflation bump, so the effective interest rate on new mortgages was up 17 basis points to 4.41% in the month.

“However, they’ve started falling again, and we expect them to continue to drop through 2023.”