Mortgage approvals in December 2023 witnessed a significant jump of 25.6% compared to the same month the previous year. This indicates that homebuyers are adjusting to the new reality of higher mortgage rates. The Bank of England’s latest Money & Credit data reveals that December saw 50,459 mortgages approved, a notable rise from 40,186 in December 2022.
The climb in mortgage approvals wasn’t just a year-on-year phenomenon. There was also a modest increase from November 2023, which saw 49,313 approvals, marking a 2.3% rise in just a month.
Early Signs of Market Recovery
Jeremy Leaf, a prominent north London estate agent and former RICS residential chairman, observed that this increase in buying and selling activity had actually started a few months earlier, around the time when inflation began to fall. He noted that these mortgage approvals provide a comprehensive view of the market, encompassing data from individual lenders and the broader market. Leaf suggests that this could be a sign of sustained market improvement despite challenges like the rising cost of living and increased housing stock, which have been keeping a check on property prices.
The Role of the Bank of England and Market Predictions
The Bank of England has maintained the base rate at 5.25% since August 2023. This stability is seen as a key driver behind the increased mortgage activity. Furthermore, the fall in swap rates — the cost of exchanging fixed-rate interest payments for floating-rate payments — hints that the markets are anticipating a cut in interest rates rather than an increase.
A Positive Outlook for 2024
Tony Hall, head of business development at Saffron for Intermediaries, pointed out that while the mortgage market typically slows down in December due to the holiday season, there has been a significant uptick in activity since then. He highlighted a “rates war” that began brewing in late 2023 and has since intensified, drawing more buyers back into the market. According to Hall, the current demand is up 12% from last year, with an impressive 21% increase in the capital. He remains optimistic about the year ahead but notes that several variables and key upcoming dates, such as the interest rate decision and the Budget announcement, could influence the market.
A Shift in Lender Strategies
Hall also mentioned that many lenders, who previously focused on refinancing activities, are now adjusting their products to boost business on the purchasing side of the market.