Net mortgage approvals for house purchases rose from 43,700 in September to 47,400 in October, the Bank of England’s monthly Money and Credit report has revealed.
According to the report, borrowers repaid, on net, £0.1bn of mortgage debt in October compared with £1.0bn of net repayments in September.
In addition, net approvals for remortgaging increased from 20,600 to 23,700.
The ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages saw a 24 basis point increase, and now sits at 5.25%.
Net borrowing of consumer credit by individuals amounted to £1.3bn in October, down from £1.4bn in the previous month.
Reaction:
Craig Fish, director at Lodestone Mortgages & Protection:
“The rise in mortgage approvals in October almost certainly reflects the steady improvement in rates we’ve seen in recent months. But there are storm clouds ahead.
“On the mortgage front, 2024 is going to see political spin collide with harsh economic reality.
“The General Election will see the current administration peddle a multitude of positive news stories while, in the background, more than one million homeowners will be coming off ultra-low mortgage rates and onto significantly higher ones.
“Even though mortgage rates look set to continue their steady decline as lenders aim to write more business with gradually increasing numbers of first-time buyers and home movers, the UK economy is very fragile and consumers are not guaranteed to come out of their shells.”
Charles Breen, founder and director at Montgomery Financial:
“Over the past couple of months, the number of mortgage enquiries from buyers has increased, with a lot of people aware that rates are coming down and keen to get themselves ready to purchase in the new year.
“All eyes are on the next meeting of the Monetary Policy Committee in December. If they raise interest rates, it will shatter the consumer confidence that has been slowly creeping back.
“Elbert Hubbard famously said, ‘To avoid criticism, do nothing, say nothing and be nothing’, and that’s advice the Bank of England should take in the next few months.
“They were slow to act initially over inflation but now they need to have a steady hand as experience fails to teach where there is no desire to learn.”
Ross McMillan, owner and mortgage adviser at Blue Fish Mortgage Solutions:
“For those people whose fixed rate deals are due to end in the coming months, the outlook remains daunting but is much rosier than it’s been for most of 2023.
“Buyer sentiment has become a lot more positive as most now believe that we are past the peak of the interest rate mountain and heading slowly down the other side.
“First-time buyers have never really gone away but appear to be particularly active right now laying foundations and making plans for their early 2024 home purchases.
“With an impending General Election, overall market activity is likely to slow due to this uncertainty, however lower interest rates and pent-up demand look set to start 2024 with gusto.
“Only a severe bout of negative inflation data in the upcoming weeks could potentially derail this upbeat outlook and an overall positive end to 2023.”
Ranald Mitchell, director at Charwin Private Clients:
“Lenders need to lend so mortgage rates will continue to edge down while the property market remains as lethargic as it is.
“We have yet to reach the consumer confidence tipping point, and with Christmas around the corner, it will likely be 2024 before things take off.
“Sub-4% rates, even with larger fees, will likely restore mortgage confidence. Based on their pricing, lenders seem to have more appetite for first-time buyers or home movers than for those remortgaging.
“This suggests to me that much of lenders’ focus in 2024 will be on property changing hands rather than refinancing. With so many existing borrowers coming to the end of fixed rates, there is a big problem for Owner Occupiers Housing costs (OOH), a key inflationary figure.
“Mortgage providers will need to wake up to the problem at hand and price better for remortgage customers, softening the impending payment shock.
“2024 will see purchase demand soar compared to 2023, and watch the new build space in particular.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“Mortgage rates have been steadily dropping in recent months as inflation has cooled and that’s likely the cause of the October rebound in mortgage approvals. But we’re not out of the woods yet.
“Following the Autumn Statement, swap rates, which impact mortgage rates, ticked up slightly due to the increase in the National Living Wage, which markets believe may put upwards pressure on inflation again.
“The smart money is on the Bank of England holding again in December and then, by the time of next decision in February, we will have a much clearer picture of the state of the economy and the direction of the inflation tide.”
Ken James, director at Contractor Mortgage Services:
“October’s increase in net mortgage approvals reflects what we’re seeing on the ground, namely that buyer appetite is returning.
“And while 2024 is going to start quietly, I feel it will end with a bang.
“First-time buyers will be a strong sector of the market next year and lenders will be looking to cash in, especially if rates continue to come down anywhere close to the low 4% mark.
“Confidence will start to ease people out of their shells and into the marketplace. I for one am looking forward to what 2024 has in store and will be happy to see the back of 2023.”
Rohit Kohli, operations director at The Mortgage Stop:
“With mortgage rates coming down almost daily, there’s cautious optimism in the mortgage market at present.
“But the lender rate wars that are ongoing could be threatened by upcoming energy cost hikes, which could apply upwards pressure on inflation.
“Lower rates have definitely stimulated demand and if rates dip below 5% for high loan-to-value mortgages, that will only increase.
“However, 2024 poses risks with many borrowers facing higher refinancing rates, potentially impacting the economy.
“We’re seeing increased interest from first-time buyers and buy-to-let investors alike but it’s nowhere near the levels it was pre-mini-Budget.
“The next Monetary Policy Committee meeting is going to lay the groundwork for 2024 and, with the economy on a knife edge, I think the decision will be very tight whichever way it goes.”
Rhys Schofield, brand director at Peak Mortgages and Protection:
“Here on the ground of the economy, the housing market is ticking along steadily despite the fact that the silly season is nearly upon us.
“That there are so many property sales being tied up bodes well for 2024. Rumours that the mortgage market is dead have no grounding in reality.”
Elliott Culley, director at Switch Mortgage Finance:
“2024 has the potential to be a good year for mortgage holders after a year of turbulence.
“There have been positive steps forward on the inflation front in recent months, which has seen rates slowly edge down.
“However, a lacklustre Autumn Statement and news of a 5% increase in energy prices have put the brakes on swap rates decreasing further.
“The economic forecast is fragile and any data that isn’t in line with forecasts can affect the mortgage market.
“It was only last week there were predictions the base rate could be cut by Q2 in 2024, now there are concerns it won’t be cut until far later in the year.
“We need positive news to continue. It’s no coincidence that falling mortgage rates help stimulate the market and bring buyers back to the table.
“Time also plays a huge factor as we are starting to acclimatise to the new normal in mortgage rates. If mortgage rates can go sub-4 % then I predict a material uptick in demand.”
Graham Cox, founder at Self Employed Mortgage Hub:
“Demand is only likely to pick up significantly when most mortgage rates are less than 4.5% in my opinion.
“Until then, the market will just tick over at subdued volumes.
“That said, it wouldn’t surprise me if the Bank of England cut the base rate by March/April.
“They are predicting a much later cut, but given it was only a year ago they forecast the worst recession in 100 years, I don’t have much faith they’re right on this either.”
Aaron Strutt, product and communications director at Trinity Financial:
“The governor of the Bank of England has consistently said that he will do anything to bring down inflation and he really isn’t joking.
“The economy is clearly in a mess and a large part of this is because of high rates.
“During the mini-Budget, it was pretty clear the Bank of England and the Government were not communicating.
“Mortgage rates have come down but they need to be lower to stimulate demand, probably closer to 4%.
“We are still speaking to lots of first-time buyers and increasingly borrowers looking to remortgage, as well as divorcing couples.”
James Bull, mortgage broker at JB Mortgages:
“The buy-to-let purchase market remains weak as high mortgage rates mean buyers need to put larger deposits down to meet lender affordability.
“Mortgage rates have dropped slightly over the past couple of months but are still high, so the purchase market in general is lower than usual.
“I suspect a few people may have been waiting for rates and house prices to drop, but as there is no sign of this happening those who have waited may feel it is time to jump in now.”
Kundan Bhaduri, property developer and portfolio landlord at The Kushman Group:
“As long-term, responsible landlords, our collective responsibility is not only to our individual properties but also to the well-being of our tenants and the PRS ecosystem.
“It is evident that, historically, reduced mortgage rates stimulate demand.
“As the cost of borrowing diminishes, aspiring homeowners are emboldened to leap into ownership.
“The Treasury must advocate for policies that promote a symbiotic relationship between landlords and tenants, recognising the intertwined roles that landlords and tenants share. Remember, landlords need tenants and tenants need landlords.
“The Government and lobby groups must champion initiatives that facilitate responsible homeownership without compromising the vitality of the private rented sector.
“This is not a battle between landlords and aspiring homeowners. Tenant advocacy is essential for a robust private rented sector and the rise of lobby groups that adopt an adversarial stance toward landlords isn’t helping either.”
Austyn Johnson, founder at Mortgages For Actors:
“Rates are pretty good and steady at the moment, we can comfortably quote a figure and next week it’s pretty much the same. That is what clients need, stability.
“2024 is going to see some major changes in the BTL industry, with many landlords turning to BTL LTD SPV lending due to tax etc.
“For resi, I think we may see a flurry of lower-value properties being snatched up due to landlords offloading properties that cannot be improved for profit or EPC.”
Tomer Aboody, director of MT Finance:
“There are signs that the Bank of England’s monetary policy is having the desired effect with a softening of consumer spending and confidence, despite the slight pick-up in mortgage approvals.
“While inflation is seemingly under more control and nearing the Bank’s 2% target, it looks as though we are heading into a period of nominal to flat growth, requiring some government stimulus for the economy in early 2024.
“A rate reduction by the fourth quarter of next year, in order to support and encourage growth and investment, would be extremely welcome.”
Mark Harris, chief executive of SPF Private Clients:
“Mortgage approvals rose as the pause in rate hikes gave borrowers hope that rates may have peaked.
“According to the Bank of England, the average rate on new mortgages continued to rise, increasing by 24 basis points to 5.25%.
“However, the direction of travel for new mortgage rates continues to be downwards with 5-year fixes available from sub-4.5%, further boosting borrower confidence and ability to commit to a purchase.”
Jeremy Leaf, north London estate agent and former RICS residential chairman:
“These figures are particularly interesting as though a little dated reflect the period when buyers were deciding whether to commit just before and after September’s pause in base rate.
“Strong wage growth and falling inflation encouraged more activity with the market proving surprisingly resilient once again, especially when you consider that these numbers do not include cash buyers who make up around 35% of total transactions.”
Matt Surridge, sales director at MPowered Mortgages:
“Today’s drop in gross lending reflects the cost-of-living crisis, with households tightening their finances amid rising daily expenses, impacting their borrowing choices.
“That being said, we are optimistic that stabilising rates and greater product innovation will likely drive increased activity in the coming months.
“Inflation falling sharply in October is a sign of good things to come, and we anticipate an upswing in mortgage approval activity after the new year.
“Anecdotally, we are also hearing that there has been an increasing number of consumers looking to product transfer and remortgage – something which is not reflected in these figures.
“As the market continues to return to normal, brokers, lenders, and borrowers are all looking for the same thing: consistency and continuity.
“To this end, our AI-powered solutions aim to streamline and speed up the entire mortgage process, offering homeowners a heightened level of certainty for all those involved.”
Emma Cox, MD of real estate at Shawbrook:
“Buyers are sticking to their property plans, even with the highest mortgage rates in over a decade.
“With mortgage interest rates more stable since the summer, sellers and buyers can plan better and the housing market looks better for it.
“Portfolio landlords are feeling the impact of higher interest rates, leading many to explore higher yielding investments such as HMOs and commercial property.
“But with housing returning to capital growth, this important factor should be considered within the overall return on investment that buy-to-let offers.
“The rental market is still active with demand outstripping supply and rents continuing to rise. After a tough year of adjustment to higher interest rates, there are reasons for optimism in 2024.”
Reece Beddall, sales and marketing director at Bluestone Mortgages:
“Following last month’s decline, which marked the lowest level since January 2023, today’s data paints a more optimistic picture for the mortgage market.
“With inflation edging downwards and consumer confidence on the rise, combined with last week’s announcements in the Autumn Statement aimed at borrowers with smaller deposits, there’s a growing sense of hope on the horizon.
“However, for those worrying about how they can take their first or next steps onto the property ladder in the current inflationary environment, now is the time to speak with a mortgage broker.
“These professionals have a paramount role to play in signposting potential and existing borrowers to the best available options for their unique circumstances so that they, too, can achieve their homeownership dreams.”
Karen Noye, mortgage expert at Quilter:
“As we navigate through a challenging phase in the housing market, there are subtle signs suggesting we might be slowly emerging from the worst of the turmoil.
“However, it’s clear that we’re not completely out of the woods yet.
“The latest data reflects that while net mortgage approvals for house purchases have ticked upwards to 47,400 in October, from the low of 43,300 in September, the market remains cautious.
“This uptick, though modest, hints at a resilient segment of buyers gradually adapting to the new normal of higher interest rates and navigating an uncertain economic landscape.
“Despite this, the overall mortgage landscape remains subdued. Gross lending has declined, suggesting that the high-interest environment continues to dampen the enthusiasm for new mortgages.
“This trend aligns with the cautious optimism in the market – people are still wary, potentially waiting for more favourable house prices and easing mortgage costs.
“While mortgage rates show signs of stabilising, they remain significantly higher than in previous years.
“What we’re witnessing is a delicate balancing act. On one side, there’s a persistent demand for housing driven by limited stock and rising rental costs, nudging potential buyers towards purchasing despite the high costs.
“On the other, the deterrent of expensive mortgages and economic uncertainty is leading many to adopt a wait-and-see approach. This push-and-pull dynamic is likely to keep the market in a state of flux.”
Kay Westgarth, head of sales, Standard Life Home Finance:
“Consumer confidence is returning to the market, with some borrowers potentially looking to take advantage of a more stable base rate to nudge their home-owning dreams towards reality.
“Nevertheless, it’s important to take a broader perspective when interpreting the UK property market, which has weathered choppy waters before and will do so again.
“The market is picking up, but a reduced supply will continue to push the limits of affordability for so many buyers.
“During these times, professional advisers are well placed to support both borrowers and existing homeowners throughout this process, and can help secure good outcomes in a challenging period.”
Adam Oldfield, chief revenue officer at Phoebus Software:
“With lenders needing to make their lending targets before the end of the year it is good to see the number of mortgage approvals increased in October.
“There was plenty of activity with rates coming down and deals aplenty, which obviously gave borrowers more confidence even as the Bank of England warned that the base rate isn’t going to be coming down any time soon.
“It was unfortunate that the Chancellor didn’t see fit to do more for the housing market in the Autumn Statement, but at least there is a strategy to make the planning process easier (again).
“How that will filter down to tackle the supply issue is as contentious as ever, will the latest in the long line of Housing Ministers fair any better than his predecessors to keep the market moving?
“With talk of an early general election being bandied around it will be interesting to see what rabbit the government will pull out of the hat, especially as home ownership is so high on the wish list for many voters.
“In the meantime, it’s down to lenders and brokers to do everything they can, with the tools they have, to ensure this upward trend continues.”
Sho Sugihara, CEO and co-founder of Fuse:
“Although renewed consumer confidence is welcome, lenders need to ensure that they are proactively analysing not just affordability but also the potential financial vulnerability of borrowers.
“The full impact of interest rate rises has yet to be felt and, with a third of lenders reporting an increase in borrower defaults over the last 12 months, we’re not out of the woods yet.
“By utilising a wider range of insights and taking a more holistic view of borrower finances, lenders can protect borrowers at a much earlier stage and offer personalised support to prevent arrears and defaults.”
Katie Pender, managing director of Target:
“This month’s statistics seem to show some green shoots of recovery for the housing market and it’s encouraging that net mortgage approvals are up. Borrowers may be feeling more confident now that mortgage interest rates are falling.
“But the statistics for the end of this year and early into 2024 will be telling. There are still many who will continue to come off historically low fixed rates and onto higher rates, which is why we are seeing approvals for remortgaging also on the rise.
“Borrowers will no doubt be pinning their hopes on some stability in the market after the past turbulent 12 months.
“However, with a General Election likely next year and a potential change in Government, all may not be plain sailing.
“Are this month’s statistics a one-off or a positive trend? Only time will tell.
“As an industry, what we can do is to work together to support lenders and borrowers with a service based on fast and reliable technology systems which put the customer first.”
