Mortgage approvals hit five-month high in boost for housing market

Experts say improving expectations over interest rates are already feeding through to lenders (Photo: Frank Augstein/AP)

A rising number of prospective housebuyers have been able to secure mortgages in a sign of potential optimism for the housing market.

New data from the Bank of England (BoE) shows 50,100 net mortgage approvals in November, up more than 4.5 per cent compared to October’s 47,900 – a five-month high.

Encouragingly, net approvals for remortgages also rose, up to 27,000 in November – a 12.5 per cent increase on the prior month’s 24,000.

Alice Haine, personal finance analyst at Bestinvest, said mortgage lending “may start to creep up” in the next few months as more buyers return to the market.

“How rapidly this happens will depend on how soon and how quickly the BoE cuts interest rates,” she said.

“Any drop from the current 15-year high of 5.25 per cent will deliver a welcome boost for first-home buyers and borrowers needing to refinance.”

Ms Haine noted that while the rise in net approvals could offer optimism to the housing market’s prospects in 2024, mortgage lending to individuals was actually flat in November folowing a £0.1 billion decline in October.

However, Ms Haine stated that improving interest rate expectations were already feeding through to lenders with buyers able to secure “signficantly better mortgage deals than the punbishingly expensive products on offer last summer”.

“This was not fully evident in the BoE’s data for November, however,” she added.

“Interest rates on newly drawn mortgages rose by 9 basis points in November to 5.34 per cent.

“However, this data set looks back not forward, so borrowers should take comfort from the escalating mortgage price war at the start of 2024, as lenders battle it out to attract new customers and strive to retain their existing client base.”

That being said, a whopping 1.6 million existing borrowers face the prospect of their cheap fixed-rate deals ending this year, meaning a likely jump in interest rate payments for many.

“The full effect of the BoE’s 14 rate rises in under two years is still yet to be fully realised,” Ms Haine said.

“The rate on the outstanding stock of mortgages saw a 7 basis point increase to 3.27 per cent as more people switched onto more expensive deals, highlighting how many borrowers are yet to reach the end of cheaper deals taken out before the rapid rate hiking cycle began.”