Bank of England reports surge in mortgage approvals

The Bank of England’s latest mortgage approval data has revealed a marked upturn in the property market. February’s mortgage approvals climbed to 60,383, a significant rise from January’s 56,087.

This 7.7% month-on-month increase, coupled with a substantial 39.8% year-on-year rise from February 2023’s figures (43,207), indicates the highest level of approvals since September 2022, which saw 65,349 approvals. This boost also represents the fifth consecutive monthly rise in mortgage approvals.

Jonathan Samuels, CEO of Octane Capital, commented on the trend: “So far this year, the number of mortgages being approved has accelerated considerably, and we’re now seeing this initial indicator of market health return to levels not seen since 2022, before the market started to cool as a result of higher mortgage rates.”

Samuels highlighted the noteworthy aspect of these figures rising without the influence of interest rate cuts or Government buyer initiatives, suggesting that the mere prospect of lower interest rates could be contributing to increased buyer confidence.

Reece Beddall, sales and marketing director at Bluestone Mortgages, reflected on the positive change: “Today’s statistics mark the fifth consecutive increase in mortgage approvals.” He noted the contrast with the same period last year, which saw declines. Despite the renewed optimism, Beddall cautioned about affordability challenges for those nearing the end of fixed-rate mortgages and advised consultation with mortgage brokers to navigate the best options available.

Tony Hall, head of business development at Saffron for Intermediaries, also remarked on the figures: “These figures are further confirmation that the housing market has seen a bumper recovery in 2024, after a volatile 2023.”

Further Reaction

Shaun Sturgess, director at Sturgess Mortgage Solutions

“After the manic mini-rate war of January, swaps went up and mortgage rates rose with them, but approvals edged higher again in February showing that demand is still strong. Despite the mixed messages emerging from lenders, and many lenders making rate changes without rhyme or reason, we have seen strong demand from first-time buyers in particular and that’s likely driving this data. That’s especially the case here in South Wales. First-time buyers are now starting to look past interest rates and focus on monthly payments, and for the majority a mortgage is still far cheaper than renting. A rate cut from the Bank of England, when it comes, should kickstart competition between lenders and once again fuel confidence in the property market.”

Katy Eatenton, mortgage & protection specialist at Lifetime Wealth Management:

“January was the busiest month in the mortgage market since before the mini-Budget debacle and, based on this evidence, the renewed confidence continued into February. The trigger in the rise in mortgage approvals for house purchase was the rate war between lenders at the very start of the year. Once rates started creeping up, the mortgage market started to slow down a little and the March data from the Bank of England may reflect this.”

Ying Tan, CEO at Habito

“Mortgage approvals in February were strong at Habito similar to January, and this is reflected in the Bank of England’s data. Consumers and homeowners took advantage of a rate war at the beginning of the year as lenders jostled for position. It has since steadied, however the combination of falling inflation and the expectation of base rate cuts should fuel demand, particularly from first-time buyers who are eager to get on the ladder.”

Ken James, director at Contractor Mortgage Services

“In our experience, January’s highs morphed into February blues so this data is a bit of a curveball. After a strong start to the year caused by the rate war, we saw a definite reduction in enquiries during February as mortgage rates increased, which wasn’t helped by lenders hiking rates at extremely short notice. Things picked up again in March and we could see mortgage approvals skyrocket if a cut to the base rate comes by the summer. Despite its turbulent start, 2024 is shaping up to be a better year than 2023.”

Harps Garcha, director at Brooklyns Financial

“Mortgage activity has seen a considerable rise compared to 2023, despite the mortgage pricing yo-yo between January and March. First-time buyers and professional buy-to-let investors are leading the charge. While lenders have been proactive in providing support through rate reductions and policy innovations in recent weeks, all eyes are now on the Bank of England to initiate the much-awaited rate reduction, which could really boost demand for mortgages.”

Darryl Dhoffer, adviser at The Mortgage Expert: 

“After the January surge, I was expecting mortgage approvals in February to be muted due to increased mortgage rates and pricing volatility. However, first-time buyers have been notably active and I expect this to continue as we enter the second quarter of 2024. For momentum to continue, we need to see inflation fall again, which will enable Threadneedle street to lower interest rates. When that first cut comes, all bets are off.”

Ranald Mitchell, director at Charwin Private Clients

“Demand for mortgages in February was stonger than expected following on from a blistering start to the year. Buyers have mobilised in numbers having had time to come to terms with current mortgage pricing, concerned that if they don’t act now, property prices will surge away again, out of their reach. With an expected base rate cut just round the corner, this will only fuel the market further, restoring confidence and signalling the worst is over.”

Stephen Perkins, managing director at Yellow Brick Mortgages

“After a significant wave of positivity in the first few weeks of the year as a fierce rate war raged between lenders, there was a lot of ebb and flow to mortgage enquiries during February and the rest of the first quarter. Though February saw a swell in mortgage approvals compared to January, the market eagerly awaits a Base Rate reduction, likely in June. This could be the catalyst to create a tsunami of mortgage demand.”

Andrew Montlake, managing director at Coreco

“Whilst we are miles away from easy street, compared to the austerity of last year we are definitely taking uncertain steps forward. We are hopefully standing on the precipice of a continued reduction in inflation and a stabilisation of interest rate movements, which will allow lenders to price more competitively and keep lower rates for longer, rather than the sharp staccato changes we have been seeing for too long now.

“The Bank of England needs to be brave and proactive rather than yet again putting itself into a position of having to be reactive later, with people all over the country being held to ransom under the weight of higher interest rates. There is a groundswell of pent-up demand from first-time buyers, movers and those wanting to remortgage, waiting for the levee to break so they can take advantage of softer prices before they strengthen once more.”

Gareth Lewis, managing director of property lender MT Finance: 

“These are positive, encouraging figures. More people are looking to borrow, and it’s a good sign when house purchase numbers are moving in the right direction. Buyers are comfortable that the interest rate environment is settled and are willing to put their hands in their pockets and buy a property.

“With remortgaging to another lender increasing, it is a further sign that the interest rate environment in moving in the right direction as more borrowers are looking at their options, rather than taking the easier route of a product transfer. If they are going through the rigmarole of remortgaging with another lender, they have to be offering something appealing.

“Consumers borrowing less on credit cards is also encouraging. There is more affordability when it comes to servicing debt, with people not increasingly borrowing to cover the higher cost of inflation as was the case previously. We will have to wait and see what happens in coming months but these are certainly signs that we are heading towards greener pastures.”

Adam Oldfield, chief revenue officer at Phoebus Software:

“February mortgage debt increased significantly since January – from £1.1 billion to £1.5 billion. This shows a sharper increase again since December, when individuals borrowed, on net, £0.9 billion. 

“It is a similarly consistent upward trajectory for net mortgage approvals on house purchases. They rose from 51,500 in December to 56,100 in January and now 60,400 in the Bank of England’s latest figures for February. Net approvals for remortgaging increased by 6,800 since January, to 37,700, having remained stagnant at 30,900 since December. 

“These figures support the growing confidence in the housing market alongside a stabilising economy and dropping inflation. The continuing decrease in interest rates tells a similar story. It dropped by a significant 29 basis points in February, to 4.90%. In December it fell by 9 points to 5.19%. 

“Lenders and borrowers can take confidence from these figures. We are definitely going in the right direction for a more buoyant housing market.”

Karl Wilkinson, CEO at Access FS

“The continuing rise in net mortgage approvals alongside falling interest rates are encouraging for the revival of UK housing activity. February’s Bank of England figures echo many positive signs that we’re seeing across the market. 

“For example, the latest Property Tracker report from Building Societies Association (BSA) shows a significant reduction in the number of homeowners concerned about paying their mortgage, alongside a decrease in people who consider affordability a barrier. And, according to the RICS UK Residential Survey, near-term sales expectations are positive, with expectations for increasing momentum in sales activity over the coming year. 

“We cannot, however, ignore the Bank of England’s latest statistics on the value of outstanding mortgage balances, with arrears more than 50% higher than a year ago. Lenders still need to behave responsibly, putting the consumer first. And borrowers should seek professional advice to avoid financial risk. We aren’t out of the woods yet.”

Stuart Cheetham, CEO of the mortgage lender MPowered Mortgages:

“Increased mortgage lending is slowly helping the property market’s recovery take root.

“A flurry of interest rate cuts in the first weeks of 2024 made mortgages cheaper and kick-started demand from many of the would-be homebuyers who sat out 2023.

“Net mortgage approvals climbed to 60,400 in February, a 17% increase compared to December’s 51,500. While this is solid progress, the road to recovery is long and we’re not yet back to a normally functioning market.

“For the market to consolidate these gains and get back to normal levels of lending, interest rates need to fall further and faster.

“Affordability remains extremely constrained in many parts of the UK, and this is impacting both buyers’ confidence and sellers’ willingness to put their home on the market when they know demand may be hit and miss.

“Lenders are competing hard on the rates they offer, both to new borrowers and to those remortgaging, but for rates to come down significantly we need a clear signal from the Bank of England that it will be ready to relax its tight monetary policy when it next sets the Base Rate in early May.”