Net borrowing of mortgage debt by individuals increased to £7.0bn in March, up from £4.6bn in February, the latest figures from the Bank of England show.
Borrowing remains above the pre-pandemic average of £4.3bn seen in the 12 months up to February 2020.
Gross lending rose slightly to £26.5bn in March from £26.0bn in February, while gross repayments fell to £19.7bn in March from £21.0bn in February.
Approvals for house purchases, an indicator of future borrowing, were little changed at 70,700 in March, from 71,000 in February, and remains above the 12-month pre-pandemic average up to February 2020 of 66,700.
Approvals for remortgaging (which the figures only capture remortgaging with a different lender) rose slightly to 48,800 in March.
This remains below the 12-month pre-pandemic average up to February 2020 of 49,500, but is the highest since February 2020 (52,100).
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Kay Westgarth, head of sales, Standard Life Home Finance:
“Today’s stats are, once again, a sign of a resilient mortgage market, and although activity in March dipped slightly, it still remains higher than pre-pandemic levels which is encouraging.
“That said, with the climbing cost of living, those with life savings and pension pots are likely to feel the pinch in the coming months as over-55s feel the compound effect of rising bills and soaring inflation, and a greater number of these individuals may well need to augment their retirement income in order to meet everyday costs.
“This is where equity release can play such a vital role, to help them achieve the comfortable lifestyle they deserve. As the average UK house price continues its trend of upward growth, it is essential for older homeowners to be aware of the benefits offered by equity release, as a powerful tool to help manage their wealth by freeing up equity currently locked in their properties.”
Steve Seal, CEO, Bluestone Mortgages:
“While it’s reassuring to see that mortgage lending to individuals has increased given current inflationary pressures, affordability concerns are, and will continue to be, a key challenge for consumers.
“As a growing number of customers are feeling a squeeze on the cost of living due to increased utility and fuel costs, as well as a hike to national insurance contributions, we expect to see a growing cohort of customers locked out of the mainstream mortgage market. Our own research found that nearly a quarter (23%) of non-vanilla customers have been turned down for a mortgage.
“For these individuals, it’s important to remember that hope is not lost. Specialist lenders have a range of solutions available to help those looking to climb onto or up the property ladder, regardless of their financial background. Ultimately, all lenders have the responsibility to point these customers in the right direction to ensure that they too have the opportunity to secure their homeownership dreams.”
Dave Harris, CEO at more2life:
“Looking at today’s Bank of England update, you could say that the outlook for the mortgage market is safe as houses.
“Alongside enduring demand, the sector is strengthened by growing remortgage activity triggered by the rising cost of living and a surge in lenders offering lower rates of interest on five and ten-year products than on two-year loans.
“In light of the current economic backdrop, we might expect an uptick in borrowers fixing for longer and exploring later life lending, particularly as borrowers can take advantage of strong house price growth through releasing equity to address inflationary pressures elsewhere.
“In higher inflation environments like we’re seeing now, the value of advice shines through more than ever, meaning that the intermediary community has a pivotal role to play in connecting lenders and borrowers and creating the best outcomes for all.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“The Bank of England records a pick-up in net borrowing of mortgage debt in March, while mortgage approvals were little changed and remain above the 12-month pre-pandemic average. This suggests that the froth has come out of the market, leaving a calmer, more measured, and ultimately more sustainable version.
“With the markets expecting another interest rate rise this month, brokers are being kept busy. Borrowers are increasingly concerned about rising mortgage rates and are keen to secure a fixed rate in particular before they rise further. With lenders pulling some deals with little or no notice, decisions have to be made quickly.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“Market talk recently has been all about the impact on house prices of recent increases in interest rates and the cost of living. However, in many ways the mortgage numbers can be a more useful indicator of future market health.
“This latest report from the Bank of England is no exception and shows that although approvals are still comfortably above pre-Covid levels they are not rising as quickly as we might have expected in the particularly strong spring season.”
Joshua Elash, director of property lender MT Finance:
“Mortgage approvals for house purchases remain strong as homeowners and investors alike focus on taking advantage of low interest rates while they can, in expectation of further rate rises in the months ahead.
“We expect this trend to continue as an increasing number of prospective buyers attempt to lock into a fixed-rate mortgage on a new property, while they get ahead of the impact inflation is going to have on increasing house prices. More than ever, this is the time to buy.”
Richard Pike, sales director at Phoebus Software:
“There was strong lending in March at £7bn and with mortgage approvals remaining steady, we should continue to see a healthy mortgage market this year.
“But rates are rising with the average interest rate paid on new mortgages increasing by 14 basis points to 1.73% in March. However, this is still lower than the same time last year when it was 1.95%.
“The rate for outstanding mortgages is also up slightly by 2 basis points to 2.04% but again it is below the 2.08% in March 2021.
“With a third base rate rise in five months expected tomorrow, new borrowers and those remortgaging will see rates increasing from historic lows. For many people this is the first time they will be experiencing this and with the rising cost of living and soaring inflation, some borrowers will have to tighten their belts.”
John Phillips, national operations director at Just Mortgages:
“Outside of the stamp duty inflated peaks, March saw the highest spike in net lending as continually increasing house prices drove up mortgage borrowing.
“While approvals remain steady, the spike in net borrowing shows consumers are looking to borrow more than ever. Competition for houses is still driving up prices, and with more sellers than buyers this looks set to continue.
“With the Chancellor warning that there may be seven more base rate rises before the end of the year, taking it to 2.5%, advice from brokers has never been more critical. The ‘effective’ interest rate rose in March and with the ongoing cost of living crisis, borrowers will be looking for advice on how to achieve long-term security in household expenses.
“Anecdotal feedback from our network of brokers reveals a push towards fixing rates for longer in the hope that the financial landscape will be less turbulent in a few years.”
