Borrowers repaid, on net, £0.8bn worth of mortgage debt in December, compared to net zero in November, according to data from the latest Bank of England Money and Credit Report.
Covering the month of December 2023, the report also revealed that net mortgage approvals for house purchases rose from 49,300 in November to 50,500.
Net approvals for remortgaging also increased, rising from 25,700 to 30,800 throughout the month.
In addition, the ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages fell to 5.28% in December, marking the first drop since November 2021.
Net borrowing of consumer credit by individuals also fell to £1.2bn in December, down from £2.1 n in November.
Reaction:
Reece Beddall, sales and marketing director, Bluestone Mortgages:
“The increase in mortgage approvals at the close of 2023 reflects what we saw on the ground, where buyers became increasingly more confident in the market.
“This was being driven by a decline in inflation, the Bank of England maintaining interest rates, and lower mortgage rates compared to earlier in the year.
“We are seeing this momentum into January, marked by heightened competition among lenders as they continue to cut rates, boosting buyers’ confidence.
“However, for those who are still worried about how they can climb onto or up the property ladder, the perfect opportunity to speak with the mortgage broker is now.
“These are industry professionals whose ultimate duty is to signpost potential and existing customers to the best available options for their unique circumstances and keep their homeownership dreams alive.”
Jonathan Samuels, CEO of Octane Capital:
“Homebuyers are continuing to grow in confidence, buoyed by a reduction in mortgage rates in recent months. However, these mortgage rate reductions were based on previous expectations across the swap market that the Bank of England will reduce the base rate this week.
“These expectations have been changing in recent weeks and we’ve seen swap rates start to creep up based on the likelihood that the base rate will remain at 5.25% for the immediate future.
“As a result, mortgage approvals have climbed, but not at the rate forecast, and we anticipate that should mortgage rates start to climb again in February it could further dampen the enthusiasm that has been shown by buyers in recent months.”
Guy Gittins, Foxtons CEO:
“A third consecutive monthly increase in mortgage approvals demonstrates that market momentum continues to build and not even the usual lull of the Christmas period was enough to deter buyers from pushing forward with their plans to purchase.
“As a result, the market has started 2024 very much on the front foot and pent up demand means buyers are acting with a greater degree of urgency than we’ve seen in recent times, encouraged by sub 4% mortgage opportunities and keen to secure them while they are available.
“While the hope is that interest rates will start to fall this year, the expectation is that the Bank of England will keep them held at 5.25% this week.
“So, for those who are looking to purchase, the best course of action is to instruct an experienced, specialised broker to ensure you secure the best rates currently available and don’t pay over the odds in the long run.”
Jason Ferrando, founder and CEO of easyMoney:
“Mortgage approvals climbed for the third consecutive time in December, suggesting that despite interest rates remaining at 5.25%, buyers are keen to make their move in 2024.
“However, they are advised to tread with caution while doing so, as the cost of borrowing remains high and there’s no guarantee that this is going to change any time soon.
“Over borrowing now with the expectation of lower rates further down the line could find them in financial difficulty when they do come to renew their mortgage terms.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“Mortgage approvals rose in December as the pause in rate hikes fuelled borrowers’ hopes that rates may have peaked.
“Fast forward to the end of January and the mortgage price war continues. With 5-year fixes available from 3.84%, there is plenty of welcome news for hard-pressed borrowers.
“Lenders are in the business of lending and seem determined to have a better year than they did in 2023. There will be bumps in the road and volatility in swap rates may lead to mortgage deals being pulled and repriced at relatively short notice.
“Borrowers who like the look of a deal would be wise to secure it; if, by the time you need to take out your mortgage rates have fallen further, you should be able to switch onto a cheaper product.
“Although borrowers remortgaging this year will still see an increase in their payments, the pain will not be as bad as it could have been had they refinanced several months ago.”
Tomer Aboody, director of property lender 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 pick-up in mortgage approvals.
“While inflation is increasingly under control and nearing the Bank’s 2 per cent 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, perhaps in the Budget.
“A rate reduction this year, in order to support and encourage growth and investment, would be extremely welcome.”
Akhil Mair, director at London-based broker, Our Mortgage Broker:
“The surge in mortgage enquiries and subsequent applications since early December has been truly remarkable.
“There’s been a dynamic blend of first-time buyers eagerly stepping onto the ladder and seasoned home movers seeking new horizons.
“We’ve also seen lots of astute investors strategically acquiring property using bridging loans.
“December was bustling with activity, as lenders slashed rates and sentiment among buyers rose sharply.
“January has carried forward this momentum, with demand for property showing promising signs of acceleration as lenders raced out of the blocks. 2024 has got off to a flying start.”
Jake Stott, Founder at Manchester-based broker, Mondo Mortgages:
“December was pretty tame on our end. Just the odd call here and there. People were more interested in their turkeys than their tracker rates.
“But come January, it’s like someone’s flipped a switch. We’re swamped. People are keen to get a slice of the property pie, and who can blame them? With mortgage rates being snipped, it’s all go.
“Loads of first-timers are looking to plant roots. It’s not just the usual ‘new year, new me’ lot. Instead, there’s a genuine shift. If this pace keeps up, we’re in for a mad February, too.”
Katy Eatenton, Mortgage & Protection Specialist at St Albans-based broker, Lifetime Wealth Management:
“December 2023 was no ordinary December. Usually demand for mortgages dips early in the month as the festivities begin but last month it was hectic right up until Christmas Eve.
“January has been just as busy, with lots of movement in the purchase market. I’ve seen an increase in both first-time buyers and home movers upsizing.
“The home movers are saying they wanted to move last year but it just wasn’t feasible with the higher mortgage rates. Remortgages are also taking over from product transfers as lenders are still fighting for new business, which is reflected in this data. Hopefully this continues throughout 2024 as lenders make up for an underwhelming 2023.”
Stephen Perkins, managing director at Norwich-based broker, Yellow Brick Mortgages:
“December, despite being a shortened working month due to seasonal festivities, was busier than expected for purchasing enquiries.
Things then went supersonic in January as falling fixed rates boosted buyer confidence. The fall in the ‘effective’ interest rate on newly drawn mortgages, the first drop since November 2021, reflects the competition in the market.”
Rowan Frayling, managing director at Newbury-based broker, J Finance:
“We had a relatively quiet December but January has been off the charts. Lenders came out of the blocks early with rate cuts and that quickly translated into activity on the ground.
“Many first-time buyers and movers have clearly decided that after a dire 2023, 2024 is the year to move.”
Malcolm Davidson, director at Hull-based broker, UK Moneyman:
“We help a lot of first-time buyers and I would say the market in the North is running much hotter than is being reported.
“One client in Hull listed her home for sale last week, a typical first home, ex-Local Authority, and it had 17 viewings booked immediately.
“Four out of the first five all offered the asking price or close to it and it went to best and final bids.
“She cancelled the other 12 viewings. I’m sure there are regional variations, and properties of higher value do seem to be sticking, but I am starting to wonder already whether the economists’ predictions of a flatlining 2024 might be a bit off.”
Michelle Lawson, director at Fareham-based broker, Lawson Financial:
“December for us was busy due to the swathes of rate cuts for existing applications in processing. The second half of January has seen a definite influx of new business.
“A lot of people who have been mulling things over have decided to act. These actions are the sort of ignition switch the industry and economy needs.”
Ying Tan, CEO at London-based broker, Habito:
“December was steady and typical for that time of the year for Habito.
“January, however, has exploded into life as lenders have cut rates and jostled for position. Enquires are double what we had in December, and these are moving quickly to applications.
“First-time buyer activity is up, whilst existing homeowners are looking to lock in lower rates.
“We have also seen an increase in those wanting fixed rates, up to 92% of our business from 88% at the end of last year.
“2024 has had an encouraging start for the market, however we look ahead with caution.”
Ross McMillan, owner at Glasgow-based broker, Blue Fish Mortgage Solutions:
“December was as expected with purchase activity in hibernation but remortgage activity steady. January, however, has started 2024 with a bang with mortgage enquiries significantly up on previous years as buyers return with gusto.
“First-time buyers remain at the heart of the market and continue to pump life into the sub-£200k market in Scotland.
“Alongside this, 2024 has also seen a notable uptick in those further up the ladder establishing their mortgage options as they creep out from the undergrowth and consider taking delicate steps up but also down the property ladder in the months ahead.
“All in all, a very encouraging start to the year and, unless unexpected inflation data or world events intervene, it seems like 2024 could be a strong and positive one for the UK mortgage and property market.”
Craig Fish, director at London-based broker, Lodestone Mortgages & Protection:
“We had a record number of mortgage enquiries in December, and that continued into January.
“It seems that first-time buyers have come out of hibernation, and those looking to potentially upsize are making those tentative first moves.
“All in all, it looks like 2024 could be a positive year, providing that the overall economic climate continues to improve.
“Many people are eagerly awaiting the first rate cut from the Bank of England and, when it comes, that should open the floodgates.”
Ranald Mitchell, director at Norwich-based broker, Charwin Private Clients:
“December was a reasonable month, in what is historically a poorer performing period.
“Enquiries continued to come in right up until Christmas closure, which is unusual, but highlights the growing appetite among prospective buyers and homemovers.
“In January, things accelerated even further, with remortgage leading the way.
“Importantly, though, home buyer and home mover activity is also picking up. It looks like the property market is getting its mojo back.”
Justin Moy, managing director at Chelmsford-based broker, EHF Mortgages:
“Before Christmas, there was a notable increase in activity, with plenty of home buyers looking to establish their borrowing budget, assess their monthly costs and the options available.
“January has definitely seen that trend continue, with buyers now finding property that is more affordable.
“With mortgage rates falling, borrowers are being quick to snaffle a much better deal.
“Typically, borrowers are taking terms of 30+ years to make payments easier to stomach, knowing they can overpay and adjust this at a later date.
“Most are taking shorter two or three-year deals hoping that costs will reduce over time. There is a renewed positivity in the market, it would be a shame if this balloon was popped before the spring.”
Adam Oldfield, chief revenue officer at Phoebus Software:
“It’s good to start the year with some positive news, mortgage approvals up and consumer credit down, even in the month before Christmas.
“The recent rate cuts, the latest now below 4% from the Nationwide, will be encouraging for those that were switched to standard variable rates (SVRs) last year.
“The waiting game may have paid off for some, but the increase from the historically low interest rates up to the current average SVR of over 8% will have put huge pressure on many households.
“Lenders will no doubt be inundated with borrowers looking to fix a new rate as quickly as possible.
“Unfortunately, that massive jump in monthly payments will have been too much for some borrowers, which was borne out by the rise in mortgage defaults towards the end of last year.
“When a UK minister has to quit his job because he can’t afford his mortgage you know the same problem must be being felt across the country.
“Then we hear that our Prime Minister is considering introducing a 99% mortgage to help first-time buyers onto the property ladder.
“When we have such a huge problem with supply in the UK, you have to wonder whether this ‘vote winning’ tactic is really what is needed in the long-term?”
Tony Hall, head of business development, Saffron for Intermediaries:
“The mortgage market is always slow in December, with all sides taking a well-earned festive break, but activity has undoubtedly ramped up since and I’m optimistic for the year ahead.
“The rates war started to slowly brew in the final weeks of last year and has boiled over in January, launching the mortgage market into the headlines.
“The competition on pricing has drawn a lot of previously hesitant or outpriced buyers back into the market, and Zoopla currently reports that demand is up 12% on this time last year – in the capital, it’s a whopping 21% higher.
“There are a lot of variables of course, and key dates to look out for – not least the interest rate decision this Thursday and Budget in just over five weeks – but at the moment, the 2024 outlook is positive.
“Lots of lenders relied on huge refinance activity last year and will be keen to continue tinkering with their product offerings in order to boost business on the purchase side of the market.”
Paul Glynn, CEO at Air:
“December is traditionally a slower period in the property market. We can anticipate a significant uptick in the January data next month after what has been a buoyant start to 2024 for the housing market.
“Come next month, we may see some notable differences, especially as the increased competition between lenders begins to open new windows of opportunity.
“As the market reacts to shifting swap rates, many younger borrowers may look to seize their chance to step into the market. Homeowners over 55 might consider unlocking wealth from their property to facilitate this support. However, it is important they consult with an adviser who can offer a comprehensive overview of the products on the market to determine the most suitable and affordable option for their individual circumstances.”
Charlotte Nixon, mortgage expert at Quilter:
“Data from the Bank of England for December points to a housing and mortgage market which is growing in cautious confidence.
“Net mortgage approvals for house purchases rose slightly from 49,300 in November to 50,500 in December, and net approvals for remortgaging increased from 25,700 to 30,800.
“This modest increase in mortgage approvals could indicate a stabilising or slightly more optimistic housing market.
“However, the numbers are still relatively modest, reflecting ongoing caution among both borrowers and lenders due to economic uncertainties like job security.
“This cautious approach is illustrated by the fact individuals repaid, on net, £0.8 billion of mortgage debt, compared to net zero in November.
“This move towards paying off debt rather than accruing more suggests a careful approach, against the backdrop of inflation and higher interest rates. In uncertain times, reducing debt can be a way to decrease monthly expenses and prepare for potential financial strains.
“Interestingly, the ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages fell by 6 basis points to 5.28% in December, marking the first drop since November 2021.
“While this decrease could provide minor relief to new borrowers, the high overall living costs might limit the impact of this reduction on household finances.
“In the realm of consumer credit, borrowing fell to £1.2bn in December, down from £2.1 n in November.
“This decrease suggests that individuals might be more hesitant to take on new debts for personal spending, likely due to higher living costs, uncertainty about future income, or a shift towards more conservative financial behaviour in these uncertain economic times, which is not a bad thing given the precarious nature of finances at the moment.
“Finally, households deposited, on net, £5.4 bn with banks and building societies in December.
“The preference for saving over spending, particularly in more liquid forms like sight deposits, indicates a desire for financial security and preparedness in the face of the cost-of-living crisis.
“This behaviour might reflect concerns about needing funds readily available in case of economic downturns or personal financial needs.
“Locking money up for long periods will help people achieve higher interest rates but if you are struggling to make ends meet then having ready access to funds is necessary.
“Overall, these figures reflect a cautious and conservative approach by individuals in managing their finances during the cost-of-living crisis but some life does seem to be being breathed back into the housing market. The focus does now seem to be on reducing debts, saving more, and being careful about taking on new financial obligations.”
Simon Webb, managing director of capital markets and finance at LiveMore:
“It is house purchase approvals that really indicate how much more confident the mortgage market is compared to this time last year.
“Today’s figures show an increase in mortgage approvals for house purchases from 49,300 in November to 50,500 in December.
“This is a great comeback from December 2022, when mortgage approvals dropped to a three-year low of 35,600 from 46,200 in November.
“Interest rates, however, are still hurting consumers. Despite the fact that the interest paid on newly drawn mortgages fell by six basis points to 5.28% in December – the first drop since November 2021 – that’s still a hike above the interest rate at the same period last year, when the rate increased to 3.67% in December 2022. Clearly, we have our work cut out for us in 2024.”
