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UK mortgage borrowing hits £7bn as house prices surge

Mortgage  The Riverwalk building in Millbank, London, a new-build residential block where flats start at £1.2million. A large number of luxury and ultra-luxury new-build apartments in London are failing to sell, as overseas investors invest less in UK property. Picture date: Wednesday November 14th, 2018. Photo credit should read: Matt Crossick/ EMPICS Entertainment.
Mortgage lending rose in March to £7bn with 70,961 mortgage approvals as house prices continue to hit record highs. Photo: Matt Crossick/ EMPICS Entertainment.

Mortgage lending rose in March to £7bn with 70,961 mortgage approvals as house prices continue to hit record highs, according to Bank of England data.

Net borrowing of mortgage debt increased to £7bn in March, up from £4.6bn in February, and remains above the pre-pandemic average of £4.3bn in the 12 months up to February 2020.

The BoE reported 70,961 mortgage approvals, down slightly from the previous month but still well above the pre-pandemic norm. Approvals for remortgaging rose slightly to 48,800 in March.

Adrian Lowery, financial analyst at investing platform Bestinvest, said that recent monthly mortgage lending data has been extremely volatile.

Read more: Bank of England set to hike interest rates to 1% to rein in inflation

“As house prices stabilise and lenders tighten their mortgage availability criteria in the coming months, the trend is likely to return closer to levels seen before the pandemic disrupted the property market in a quite unpredictable manner.

“A detail in the release reveals that the ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 14 basis points to 1.73% in March, while the rate on the outstanding stock of mortgages ticked up 2 basis points to 2.04%. Confirming that homebuyers and remortgagers are facing higher loan rates – as well as stricter borrowing rules.”

Simon Gammon, managing partner at Knight Frank Finance, added:The Bank of England remortgaging data only captures deals when borrowers stay with their currently lender so undershoots the ground swell of activity underway.

“Another hike in the base rate is overwhelmingly likely tomorrow.

“If the Bank of England indicates that it’s likely to take a more aggressive approach to combat inflation we’d expect to see an immediate impact in the mortgage market.

Read more: Stamp duty: Buyers to pay more taxes as 4.3 million homes pushed into higher bracket

“Lenders are already repricing products on a weekly basis so borrowers have got to move quickly if they want to secure a good rate – this isn’t something you can put off until tomorrow.”

Individuals borrowed £1.3bn in consumer credit, while small and medium-sized non-financial businesses repaid £700.0m and large businesses borrowed £1.9bn from banks, down from £4.3bn in February.

Credit card lending accounted for more than half of the increase in March, which was before a sharp rise in energy costs and an increase in taxes in April.

The effective interest rate paid on individuals’ new time deposits with banks and building societies rose by 16 basis points to 0.92%.

Watch: Will UK house prices ever fall?