In October, the UK witnessed a significant increase in mortgage approvals, surpassing forecasts. The Bank of England reported that net mortgage approvals for house purchases climbed to 47,400 from September’s 43,700. This figure not only exceeded the anticipated 45,000 but also marked the highest point since July. Despite this uptick, it’s important to note that this number is still about 28% lower than in October 2019, before the pandemic struck.
Remortgaging Trends
There was also an increase in approvals for remortgaging, rising to 23,700 from 20,600. Remortgaging is a key aspect of the property market, often reflecting homeowners’ confidence and financial stability.
Mortgage Approvals – A Health Indicator
Mortgage approvals are a timely measure of the housing market’s health, influencing broader economic aspects like house-related spending and household confidence. The recent data indicates a potential easing of the housing downturn, a positive sign for investors.
Interest Rate Impact
The stabilization can be partly attributed to the Bank of England’s decision to maintain interest rates at 5.25% in September and November. This pause in interest rate hikes has been seen as a boost to market stability and buyer confidence, as noted by Jason Tebb, CEO of OnTheMarket.com.
Shifts in Mortgage Rates
There’s been a noticeable decrease in mortgage rates. Two-year fixed mortgage rates with a 60% loan-to-value ratio dropped from 6.2% in July to 5.5% in October. Similarly, rates for five-year deals have declined since summer, making mortgages more accessible.
House Price Trends
Despite these positive developments, house prices in October were lower on average than in the same month in 2022, as reported by Halifax and Nationwide. However, all popular mortgage products were significantly more expensive than in 2021.
Rising Mortgage Rates and House Sales
The average rate on new mortgages hit a 15-year high of 5.25% in October, impacting house sales, which remained below their pre-Covid average.
Consumer Credit and Economic Implications
The Bank of England data revealed that consumer credit eased slightly to £1.3 billion from £1.4 billion in September. This stability, according to Paul Dales from Capital Economics, suggests that higher interest rates haven’t significantly impacted unsecured borrowing yet.
Household Savings and Spending
Interestingly, households deposited £4.6 billion in banks and building societies, the highest since November last year. This increase, primarily in fixed-term accounts, might affect spending and economic growth. However, economists like Samuel Tombs from Pantheon Macroeconomics anticipate a rise in spending as savings stabilize.