Mortgage approvals hit highest level in 18 months

Mortgage approvals have reached their highest levels in 18 months, indicating a return of confidence to the property market, according to Bank of England data. In March, there were 61,300 net mortgage approvals, the highest since September 2022.

Gross mortgage lending also rose to £20.1 billionn, the highest in 13 months. However, mortgage approvals are likely to slow over the next couple of months, reflecting higher mortgage rates as traders have pushed back their expectation of when the Bank of England will start cutting interest rates.

Net approvals for remortgaging decreased from 37,700 to 34,200 over the same period.

Consumer credit borrowing increased to £1.6 billion in March, from £1.4 billion in February which was driven by net borrowing through credit cards, which rose from £0.5 billion to £0.7 billion in March Net borrowing through credit cards, rose from £0.5 billion to £0.7 billion in that period.

Responding to the figures, StepChange Chief Client Officer Richard Lane said “It’s encouraging to see rising mortgage approvals and increased use of credit, which in part will reflect growing consumer confidence. However, for many others, the increased use of consumer borrowing may reflect more difficult circumstances, with our recent polling estimating that one in six people – 8.6m UK adults – has recently borrowed to keep up with essentials.

“The cost of living crisis, while showing signs of abating, is still casting a long shadow over people’s finances and it’s critical that government, lenders and regulators remain vigilant to the difficulties people will face over the coming weeks and months.

“In particular, preventing harm from consumer credit debt must be at the top of the agenda for the Financial Conduct Authority’s Consumer Duty. By spotting financial difficulty early and providing effective support and forbearance, lenders can prevent harmful consumer borrowing and arrest debt spirals.”

John Phillips, CEO of Spicerhaart and Just Mortgages, said “The positive momentum we’ve been seeing in the market certainly continued in March with the highest number of net mortgage approvals since September 2022. This in spite of the fact of another disrupted month with an early Easter and half terms across the country. It certainly mirrors our own experiences on the ground with strong demand for both appointments, but also bookings for valuations within our estate agency branches.

“The wheels of the mortgage market are certainly moving, as evidenced by a further increase in monthly property transactions – also released today. This is all hugely positive – we just have to hope the recent unsettling on swap rates and subsequent rise in mortgage rates across the market doesn’t upset the apple cart. This could certainly impact the downward trend on the ‘effective’ interest rate paid by borrowers, which improved further in March.

“Nonetheless, it further proves the point as to why brokers are so important when trying to navigate the market. Maintaining this growing consumer confidence and positive momentum requires brokers to remain proactive and continue to offer that five-star service. While we cannot influence swap rates or the monetary policy of the Bank of England, we can continue to throw our arms around our clients and provide all the necessary support to help them push ahead with plans.”

Simon Webb, Managing Director of capital markets and LiveMore said “The figures released today offer a cautiously optimistic glimpse into the residential housing market. While it’s important not to overreact to short-term trends, there are signs of a potential improvement, with the 20% uptick from February 2024 in non-seasonally adjusted residential transactions, building on the consistent increases we have witnessed from 67,320 in January 2024.

“The increase in transactions is a welcome development, though it should be remembered these figures are still down 9% against 95,160 in March 2023. This uptick, if sustained, could signal a course correction.

“However, a note of caution is still warranted. Affordability remains a key concern. Lenders should provide flexible mortgage products tailored to the specific needs of their customers across all age groups, including our older and potentially vulnerable borrowers. By offering access to specialist advice and financial solutions, lenders can empower customers to capitalise on any positive shifts in the market.”

Neil Kadagathur, Co-Founder of Creditspring said “The UK’s increasing reliance on credit cards risks piling more debt onto already struggling households. With so many reliant on borrowing to survive, the credit card model preys on people not being able to repay the full amount every month and therefore pushing millions of people into long term debt, or worse, uncontrollable debt spirals.

“Financial providers should be improving the transparency of their communications so borrowers understand the true implications of not paying the balance in full; whether that is in terms of the amount of time it will take them to clear the debt or the total amount they will pay when they only pay the minimum amount.”

Tom Cuppello, Associate Partner at Vestigo Partners said “In further signs of building consumer confidence amid a more stable economic outlook, net mortgage approvals reached their highest levels in 18 months.

“Consumer credit volumes increased off the back of greater borrowing on credit cards through March, possibly driven by rising sales through the Easter weekend. However, we have seen just this week lenders increasing rates on mortgages amid dimming rate cut prospects from the Bank of England through this year.

“As consumers enter the market expecting rates to continue on the downward trajectory we saw at the start of the year, lenders will need to be careful they are supporting the long-term financial interests of their customers.”