Net mortgage approvals for house purchases rose from 51,500 in December to 55,200 in January, new data from the Bank of England’s latest Money and Credit report has revealed.
This figure marks the fourth consecutive monthly rise, as net approvals for remortgaging also remained stable at 30,900 in January.
According to the data, individuals repaid, on net, £1.1bn of mortgage debt in January compared to £0.9bn in December.
The ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages fell by 0.09% to 5.19% in January.
Net borrowing of consumer credit by individuals rose to £1.9bn from £1.3bn the month prior.
Throughout the month, households deposited, on net, £6.8bn with banks and building societies, while non-financial businesses (PNFCs and public corporations) borrowed, on net, £0.3bn.
Reaction
Stephen Perkins, managing director at Yellow Brick Mortgages:
“The improvement in January relative to December reflects the growing confidence in the market as mortgage rates started dropping in the fourth quarter of last year. We may see a further uptick in the next set of data. Sentiment has taken a bit of a hit in recent weeks but it’s still far stronger than it was in 2023.”
Hannah Bashford, director at Model Financial Solutions:
“This reflects what we’re seeing when advising borrowers. Those lucky enough to have savings are using those to pay off their mortgage to mitigate the higher interest rates and monthly payment increases but on the flip side we’re also seeing more people with short term debt. The decrease in the actual interest paid is great news and let’s hope that the small mortgage rate increases we have been seeing recently will be counteracted by decreases again soon.”
Robert Timm, managing director at Sunland Mortgages:
“I think for anyone involved in mortgages on a day-to-day basis, these results will be no surprise. Seasonally, there is usually an uptake in mortgage approvals post-Christmas anyway, but this year it was even greater due to the mini price-war between lenders. The frustrating thing is, this already feels like a lifetime ago, and the trend has almost certainly reversed.”
Graham Cox, founder at Self Employed Mortgage Hub:
“The biggest takeaway from the Bank of England’s report is that for the first time ever since these figures were collated in 1994, net mortgage lending was negative (-0.2%) on an annualised basis. This demonstrates just how much skyrocketing mortgage rates have suffocated buyer demand. Existing borrowers are now paying back more mortgage debt annually than lenders are issuing in new mortgage loans. Quite something.”
Rohit Kohli, director at The Mortgage Stop:
“These figures reflect what we often see, namely an uptick in people looking to move post-Christmas. That seasonal surge was helped by the mini-rate war that ensued through the tail end of 2023 and into January 2024.
“However, since then rates have gone up a little and it’s caused some people to pause as doubt sets in over the stability of this recovery. The next couple of weeks are going to be significant for the Chancellor, property market and wider economy.”
Darryl Dhoffer, adviser at The Mortgage Expert:
“This data confirms that January, with a lower interest rate market than we are seeing today, spurred the market on. As rates go down, so approvals go up. There was an appetite out there from borrowers in January that we hadn’t seen for some time. However, this can easily be muted when there are sudden spikes in lenders’ rates as we have seen of late.”
Justin Moy, managing director at EHF Mortgages:
“For those who can afford to, mortgage debt is being repaid quicker than normal to mitigate the extra cost of higher rates, but many are increasing their debt through loans and credit cards just to pay the basic costs of living. The routine of remortgaging to repay debt every few years has come to a halt, as borrowers scramble to keep a lid on mortgage payments. We have plenty of financial pain to go through still before we will see improvement.”
Gary Bush, financial adviser at MortgageShop.com:
“Crikey, the Bank of England data just released is head wobbling. The population are paying down their mortgages and yet other debt is increasing. The mortgage approvals data just confirms what we have been saying since the new year started, namely 2024 kicked off nicely and consumers are correctly seeking the advice of financial advisers to help them navigate the minefield that is the fixed rate mortgage market. It’s game on for the mortgage rate war that has been raging – in the next 2 weeks, we expect some strategic action from lenders.”
Matthew Jackson, director at Mint FS:
“Interesting figures against a background of fluctuating mortgage rates and dubious notice periods from lenders. These show the resilience of the mortgage industry and specifically the ability of brokers to work against a tough economic backdrop.”
Riz Malik, founder & director at R3 Mortgages:
“The jump in consumer credit is concerning as many are using plastic to supplement their monthly expenditure. However, that debt still has to be repaid and with the cost of living crisis, this is a worry. All eyes are now on the Budget to see what lifelines are going to be provided. I am not holding my breath.”
Akhil Mair, director at Our Mortgage Broker:
“The sustained growth underscores increased confidence among homebuyers and signals opportunities for market expansion and investment. The latest figures from the Bank of England reveal a positive trend in mortgage approvals for January, with 55,227 approvals, up 7.2% from December and 40.2% from January 2023. This marks the fourth consecutive monthly increase, reaching the highest level since June 2023.”
Karl Wilkinson, CEO at Access Financial Services:
“It’s encouraging to see individuals continuing the recent upward trend of repaying mortgage debt – it’s up by £300m since last month. Equally encouraging is the continuing recent upward trend for net mortgage approvals for house purchases. They’ve consistently risen from 49,300 in November 2023 to 55,200 in January 2024.
“After the flurry of mortgage interest rate cuts we saw over the winter and a six basis point drop in December (the first drop since November 2021), it’s no surprise to see that the interest rates paid on newly drawn mortgages fell again in January – this time by nine points.
“After all this good news, however, it is a concern to see consumer credit borrowing rising by £600m to £1.9bn in January.
“We aren’t out of the woods yet. Borrowers still need to be cautious and request professional advice from mortgage brokers to make sure they get the right loan for them. At the same time, lenders need to maintain sensible lending policies to avert the danger of rises in repossessions.”
Emma Cox, MD of Real Estate at Shawbrook:
“January’s rise in Mortgage Approvals reflects the increasing confidence returning to the market.
“Falling mortgage rates and lower borrowing costs have encouraged a flurry of activity as buyers race to secure favourable deals. However, mortgage rates are beginning to creep back up and cuts to interest rates may not materialise as soon as previously predicted.
“Landlords looking to diversify and add to their portfolios should act swiftly where possible, concluding deals to future-proof their strategies against a potential rise in borrowing costs, and maximising the opportunity presented by strong demand in a rental market still lacking suitable and available property.”
Jonathan Samuels, CEO of Octane Capital:
“2024 has started in the same way 2023 finished, with an increase in buyer appetites driving an uplift in mortgage market activity.
“This is despite hopes of an early interest rate reduction failing to materialise, but with the general consensus being that a cut is on the horizon, we expect the market to continue moving forward positively over the coming months.”
Jason Ferrando, founder and CEO of easyMoney:
“A fourth consecutive increase in mortgage approvals demonstrates that buyer confidence is on the up, despite the base rate remaining at a lofty 5.25%.
“While buyers are continuing to tread with a degree of caution we’re already seeing this uplift in mortgage market activity start to filter through to the wider market and help stimulate sold prices in a positive manner.
“These early signs suggest that the property market is set for a far more settled year and this is good news for both homebuyers and sellers alike.”
Marc von Grundherr, director of Benham and Reeves:
“Buyer indecision has been the biggest factor slowing the property market over the last year and who can blame them with interest rates climbing and mortgage offers changing by the day.
“However, we simply haven’t seen the same level of hesitation in recent months and market stability has improved notably since interest rates were first held in September of last year.
“This confidence boost has naturally led to an increase in mortgage approvals and sellers are already starting to benefit from a greater degree of interest and an increase in the number of offers submitted.”
Adam Oldfield, chief revenue officer at Phoebus Software:
“Seeing that net mortgage approvals rose in January is an encouraging sign for the coming months, which is good news particularly when HMRC has also reported this morning that residential transactions fell in January. The Bank of England figures also show that the amount of mortgage debt repaid increased in January, another good sign in a month when many borrowers would be paying off credit card debt from Christmas.
“There are so many conflicting reports regarding the UK housing market, however. House prices falling, house prices rising, mortgage rates rising, lenders cutting rates, swap rates rising. The truth I suspect is somewhere in the middle, but lenders are the ones caught in the middle. Managing the complexities of reaching lending targets, whilst ensuring exposed borrowers are identified and managed, is paramount while the market remains in something of a flux.”
“With less than a week to go until the Budget, the last before a general election is called, will the Chancellor use this opportunity to announce measures to help people to get onto the property ladder? It’s been done before, in fact it’s a well-used mechanism for winning votes, especially from the younger generation. The question will be whether anything announced will be yet another sticking plaster for the housing industry?”
Arjan Verbeek, CEO of Perenna:
“Despite net approvals for house purchases slightly rising, the fact that net mortgage lending decreased by 0.2% – the first negative drop since records began – confirms homeownership is becoming an even more challenging prospect for many. This is in part due to the short-termism of the current mortgage market, which is structured on homeowners securing teaser rates and remortgaging every few years. This model is unfit for purpose.
“Both younger and older borrowers face significant difficulties when it comes to securing a mortgage. On one hand, two-thirds of potential first-time buyers are struggling to secure a mortgage due to income levels, and two-fifths feel discouraged from pursuing homeownership as a result. On the other hand, the mortgage market is also problematic for over-55s, where three-fifths have reported a lack of choice regarding mortgage products suiting their needs, over a third believe their mortgage is restrictive because of their age, and over a quarter fear they would not be able to afford their mortgage if subject to standard variable rates (SVR).
“To make homeownership more affordable for aspiring homeowners and more accessible for older borrowers, alternative options are needed in the UK market to short-term mortgage deals, and long-term fixed rate mortgages, such as those popular in Denmark and the Netherlands, offer one such alternative. Home ownership is a longer-term aspiration for potential buyers, so it would make sense that their mortgage product reflects that.”
