Net borrowing of mortgage debt by individuals rose by £1.0bn, to £3.6bn in December, according to the Bank of England’s (BoE’s) latest Money and Credit Report.
Net mortgage approvals for house purchases slightly increased to 66,500 in December, compared to a decrease of 2,300 in November.
Approvals for remortgaging decreased by 700 to 30,500, falling for a second consecutive month.
In addition, net consumer credit borrowing by individuals was £1.0bn in December, slightly up from £0.9bn in the previous month.
During December, private non-financial corporations (PNFCs) repaid, on net, £2.8bn of finance, compared to £1.8bn of net finance raised in November.
The net flow of sterling money (known as M4ex) was £8.9bn in December, compared to -£0.6bn in November.
This was driven by households’ holdings of money, which increased by £4.5bn.
The net flow of sterling net lending to private sector companies and households (M4Lex) was £4.8bn in December, compared to -£1.8bn in the previous month.
Households accounted for £4.0bn of the December flow.
Reaction:
Tony Hall, head of business development at Saffron for Intermediaries:
“Following November’s post-budget dip in mortgage approvals, today’s figures offer a more optimistic outlook for the market as we move into 2025.
“With inflation easing to 2.5%, slightly lower than in November, there’s growing anticipation that if it follows this downward trajectory, a base rate cut could be on the horizon.
“This would mark a shift that would create much more favourable conditions for prospective buyers and drive an increase in mortgage lending and approvals.
“Last week’s discussion around mortgage regulation reforms, including how much first-time buyers are allowed to borrow, is also encouraging.
“Right now, lenders are limited in how much of their lending can go beyond 4.5x income, which blocks many buyers who can clearly afford higher multiples.
“More flexibility would help lenders say yes to the right cases, but it’s important to avoid the mistakes of the pre-financial crash era and ensure lending remains responsible.
“That said, the bigger challenge is tackling the housing shortage – we really need the Government to focus on building more homes to keep up with demand.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“Mortgage approvals for new purchases rose after November’s slip, which bodes well for the spring market.
“Remortgaging numbers dipped slightly again, but this could mean more borrowers stayed with existing mortgage providers instead of switching to a new lender, rather than borrowers moving onto standard variable rates and not refinancing at all.
“The effective interest rate paid on new mortgages decreased again to 4.47% in December as lower pricing at the time is reflected in the official figures.
“With swap rates continuing to fall and the markets predicting further base-rate reductions this year, it is hoped that this will feed through in the form of lower mortgage rates in coming weeks and months.”
Jeremy Leaf, North London estate agent and a former RICS residential chairman:
“Mortgage approvals always provide an excellent pointer for direction of travel for the market.
“These figures are particularly interesting, continuing the up a bit, down a bit, trend from last month, hot on the heels of the disappointing Budget.
“On the ground, activity is finding a new level. We are seeing more enquiries but buyers remain cautious with no significant changes expected until perhaps a drop in interest rates next month.”
Tomer Aboody, director of specialist lender MT Finance:
“The growth in borrowing and approvals in December further indicates the confidence which was felt in the market at the back end of the year.
“Interest rates may be higher than many are used to but remain at an affordable level compared to 2023, and further indications of another drop in rates is fuelling borrower confidence.
“With the October Budget implications yet to fully hit, we are hopeful that activity in the market continues to improve as borrowers’ ability to finance remains high.”
Stephanie Daley, director of partnerships at mortgage advisor, Alexander Hall:
“2024 was a year of very positive growth for the mortgage sector, with the number of approvals seen trending upwards as a result of a stabilising property market, with more of the same expected we throughout 2025.
“Whilst the fast approaching stamp duty deadline will help to cultivate buyer activity levels in the short-term, long-term health is also expected to be driven by the potential easing of loan to income caps which will help improve affordability, as well as the expectation of further base rate reductions.
“This will help boost confidence amongst first-time buyers and next steppers, with further support likely to be provided via the ongoing lender innovations being introduced to the market.”
Jonathan Samuels, CEO of specialist lender Octane Capital:
“Any predictions of a seasonal slump in mortgage market activity have been dispelled today, with the latest figures from the Bank of England showing that mortgage approvals actually increased in December, despite the distractions of the festive season.
“This heightened activity was no doubt driven, in part, by buyers keen to make their move ahead of the impending Stamp Duty deadline this April.
“However, mortgage market health hasn’t been driven by the prospect of a Stamp Duty saving alone and, in fact, we saw some 31% more mortgage approvals complete over the course of last year when compared to 2023.
“Whilst mortgage rates haven’t reduced as much as the nation’s buyers may have liked they remain largely undeterred and, with the prospect that they will at least start to fall in 2025, we expect another busy year for the mortgage sector.”
Nathan Emerson, CEO of Propertymark:
“Many people are likely to have been working with urgency to get their mortgages approved to help ensure they can complete ahead of Stamp Duty threshold increases in England and Northern Ireland before the start of April.
“It has been an upbeat start to the year overall and very much spurred on by some lenders reducing rates by up to 0.35% across many of their fixed-rate re-mortgage products.
“Our Propertymark member agents have also in turn also witnessed an uplift of around 10% in activity from prospective buyers.
“Depending on what happens with inflation as the year progresses, hopefully the Bank of England will look to reduce the base rate further, which will likely translate into more affordable mortgage products and further stimulate the housing market.”
Mark Hollands, head of sales and distribution, Bluestone Mortgages:
“It’s encouraging to see the mortgage market end 2024 on a high, despite the usual Christmas market slowdown.
“As 2025 gets underway we hope to see demand continue to climb as consumers look to get ahead of the incoming Stamp Duty changes.
“For those unsure of what steps to take during the current environment, speaking to a mortgage broker can provide invaluable support in helping you achieve your homeownership goals.
“Taking out a mortgage is a major life decision; seeking advice from a broker can help simplify this process and assist you in finding the right mortgage for your needs.”
