Mortgage approvals hit highest level in two years as housing market recovers
The housing market continued its recovery in August with mortgage approvals rising to their highest level in two years, new data shows.
According to figures from the Bank of England, 64,900 mortgages were approved last month, up from 62,500 in July and the third consecutive month of increases.
This took approvals to the highest level since August 2022, when 72,000 mortgages were approved.
Approvals for remortgaging also increased, rising to 27,200 from 25,200 in July.
The figures came shortly after Nationwide’s house price index showed house prices rose 3.2 per cent year-on-year in September, the fastest pace in two years.
Thomas Pugh, economist at RSM UK, said the figures “reinforce our view that the housing market is reviving, and will continue to improve over the next year, and into 2025.”
The housing market has struggled over the past couple of years as buyers have struggled with higher interest rates and an inflationary surge which knocked spending power.
However, the Bank of England cut rates for the first time since the pandemic last month and markets expect at least one further cut before the end of the year.
Mortgage rates have fallen in response, with Nationwide and Barclays among the major lenders to have dropped rates over the past week in a bid to attract buyers.
Combined with improving real incomes, many analysts are hopeful that the market will continue its recovery as the Bank of England continues to reduce interest rates.
“We expect mortgage approvals to gain further ground, rising to 67,000 in the next few months as mortgage interest rates decline in response to Bank of England interest rate cuts,” Rob Wood, chief UK economist at Pantheon Macroeconomics said.
The Bank’s figures also showed a slight increase in consumer borrowing, driven largely by personal loans and motor finance lending rather than credit cards.
Total consumer credit increased to £1.3bn in August, up from £1.2bn the month before.
“A rise in consumer borrowing in August could signal that many stretched households are still battling the cost of living by turning to credit to get by,” Karim Haji, global and UK head of financial services at KPMG said.