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UK mortgage approvals rise to levels seen before Liz Truss’ mini-budget

mortgage City of London skyline view from Hampstead Heath, capital of UK
Mortgage rate war among lenders sees February surge in approvals. (Dalibor Brlek)

Mortgage approvals rose in February and topped 60,000 for the first time since Liz Truss’s mini-budget crisis sent the lending market into turmoil.

The number of mortgage approvals made to home buyers increased from 56,100 in January to 60,400 in February, according to Bank of England (BoE) data. Banks raced at the start of the year to offer lower mortgage rates to buyers as markets predicted several interest rate cuts in 2024.

This represents a month-over-month increase of 7.7% and a 39.8% surge year-over-year compared to February 2023, which recorded 43,207 approvals. This also puts mortgage approvals at their highest level since September 2022, when they reached 65,349.


Approvals for remortgaging also increased in February, from 30,900 to 37,700, according to the BoE’s Money and Credit report.

Jonathan Samuels, CEO of Octane Capital, said: "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.

Read more: UK house prices fall for first time in three months

"This is despite the fact that we’re yet to see an interest rate cut or any kind of buyer initiative introduced by the government, although there’s no doubt buyer confidence has been boosted by the prospect of lower interest rates on the horizon.”

The effective interest rate — the actual interest paid — on newly drawn mortgages fell from 5.2% in January to 4.9% in February.

The average interest paid on newly drawn mortgages fell by 29 basis points, to 4.90% in February.

The Bank of England left interest rates unchanged at a 16-year high of 5.25% for the fifth time in a row in March.

Traders widely expect the first rate cut to take place in the summer, either in June or August.

Katy Eatenton of Lifetime Wealth Management, believes the rate war between lenders at the start of the year was the key driver behind the surge.

Read more: Why taxpayers are paying £40bn in interest on Bank of England reserves

“The trigger in the rise in mortgage approvals for house purchase was the rate war between lenders at the very start of the year,” she said.

“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,” she added.

Individuals borrowed, on net, £1.5bn of mortgage debt in February, compared to £1.1bn of net repayments in January.

Ashley Webb, UK economist at Capital Economics, warned the rebound in approvals is “unlikely to continue in the near term”.

Shaun Sturgess, director at Sturgess Mortgage Solutions, said: “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.”

BoE data showed that consumer credit grew at an annual rate of 8.7% in February, down from 9.0% in January.

Watch: National living wage rise could mean stickier inflation, economists warn

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