City thinking, local knowledge

Why Are UK Mortgage Approvals at Their Highest Level Since The Mini Budget?

By Questa Chartered

At the start of 2024, UK mortgage approvals hit a 15-month peak. The Bank of England announced that a whopping 55,200 mortgages got the green light in January alone. This uptick from 51,500 the month before marks the highest level since the post-Mini Budget slump in October 2022. So, what’s behind this sudden surge?

The Mortgage Approvals Tides Are Turning

Remember the Mini Budget chaos? You’ll recall it sent mortgage rates through the roof and had us all biting our nails. But now, are there reasons to be a little more optimistic? Mortgage rates have begun to stabilise. Inflation is on a downward trend. And the relentless rise of interest rates has slowed. With these shifts, the once stagnant demand for property is breathing anew.

In the same vein, remortgaging numbers have held steady at 30,900 this January. Better still? The interest rate on new mortgages is lower. It has dipped from 5.28% to a slightly more palatable 5.19%. So, has the Bank of England’s decision to keep interest rates steady at 5.25% caused cautious optimism in the market?

Newfound Optimism?

Some Industry experts are noticing a shift. The climate of mortgage and interest rates has changed over the last few months. Is this change the reason for newfound enthusiasm among buyers and sellers?

Tom Bill of Knight Frank noticed that as homebuyers anticipate lower interest rates, it has encouraged the market to adjust positively. The lower interest rates are despite mortgage approvals and transactions still trailing behind the five-year average.

Samuel Tombs from Pantheon Macroeconomics has added to the optimism. He predicts that the increase in mortgage approvals could signal a boost in borrowing. A borrowing boost would have knock-on benefits for spending in the coming months.

The January rebound in retail sales reinforces this prediction and suggests a brighter outlook for consumer spending this year.

Yet, Caution Prevails

Not everyone’s ready to pop the champagne just yet. Analysts acknowledge a notable improvement. But the market is far from fully recovered. Mortgage approvals, though at a high, remain a tenth below the 2022 average. And this reflects lingering affordability issues.

Net mortgage debt repayment has increased despite the rise in mortgage approvals. This contradiction suggests people are still being cautious.

Looking Ahead

The shifts in the UK housing market reflect a broader economic evolution. As mortgage rates stabilise and consumer confidence tentatively returns, the outlook for 2024 seems more hopeful. But the road to recovery is paved with uncertainty. And that’s where expert financial advice comes in.

For those navigating these changing tides, seeking guidance from financial planners can provide clarity and support. Questa can help you to understand your mortgage options and plan for a future home purchase. Better still? Expert advice can demystify the process and help you to make informed decisions.

While the increase in mortgage approvals signals a positive shift in the UK housing market, we need to remain informed and cautious. The landscape is evolving. With the right support and advice, navigating these changes can help you to achieve financial and property ownership goals.

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