Mortgage borrowing increases

Latest Bank of England data has shown that net borrowing of mortgage debt by individuals increased sharply by £9.7 billion to £13 billion in March, following a decrease in net borrowing of £1.0 billion to £3.3 billion in February.

The annual growth rate for net mortgage lending rose from 1.9% to 2.7% in March, the highest since March 2023

Net mortgage approvals for house purchases decreased for the third consecutive month, with a fall of 800 to 64,300 in March. By contrast, approvals for remortgaging increased by 1,000 to 33,400 in March.

Richard Pinch, Senior Risk Director, at Broadstone said “The stampede for house buyers to complete on property transactions before the Stamp Duty threshold change led to a surge in mortgage borrowing in March. Mortgage borrowing increased by 292%, or £9.7 billion, through the month to reach its highest level since before the conclusion of the Stamp Duty holiday introduced in the teeth of the global pandemic.

“The wider picture however is not quite as rosy as April data shows house prices slumping quicker than expected which is backed up by the Bank of England’s figures finding that mortgage approvals for house purchases – a proxy for future borrowing – decreased for a third consecutive month. There is an element of a bring-forward effect in these numbers from the Stamp Duty change which will most likely impact next month’s figures as well.”

Aaron Milburn, UK Managing Director at Pepper Advantage, said: “UK mortgage approvals dipped again in March, decreased from 65,100 in February to 64,300 in March, or around 1.3%, according to the latest figures from the Bank of England. While new mortgage approvals declined, remortgaging approvals increased by nearly 3% to 33,400. These mixed signals suggest households are exercising caution with their finances, as potential buyers wait to see whether interest rates will decline further amid an uncertain economic backdrop.

“A cautious outlook aligns with recent findings from Pepper Advantage’s Q1 UK Credit Intelligence report, released yesterday, which showed UK arrears stalling for the first time since 2022, driven by improvements in the buy-to-let market. The residential arrears rate, however, increased by 0.3%, consistent with modest growth in consumer price inflation. Disruptions to global supply chains could ignite further inflationary pressures on borrowers, underscoring the need for lenders to remain vigilant and ready to support mortgage holders during unpredictable times.”