UK Mortgage approvals have risen for the third consecutive month, according to the latest Money and Credit statistics from the Bank of England.
The average interest rate paid on new mortgages fell for the first time since November 2021.
Net mortgage approvals for house purchases rose from 49,300 in November to 50,500 in December, adding to signs of stabilisation in the property market.
Net approvals for remortgaging with a different lender also increased from 25,700 in November to 30,800 in December.
Individuals repaid, on net, £0.8 billion of mortgage debt in December compared to net zero in November.
The ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages fell by six basis points to 5.28 percent in December, the first drop since November 2021.
However, the rate on the outstanding stock of mortgages increased by nine basis points, from 3.27 percent in November to 3.36 percent in December.
The Bank of England’s own benchmark interest rate is currently 5.25 percent, where it has stood since August.
According to the UK central bank, net borrowing of consumer credit by individuals fell to GBP1.2 billion in December from GBP2.1 billion in November.
Commenting on the mortgage approval data, Reece Beddall, sales and marketing director at Bluestone Mortgages said: “The increase in mortgage approvals at the close of 2023 reflects what we saw on the ground, where buyers became increasingly more confident in the market.
“This was being driven by a decline in inflation, the Bank of England maintaining interest rates, and lower mortgage rates compared to earlier in the year.
We are seeing this momentum into January, marked by heightened competition among lenders as they continue to cut rates, boosting buyers’ confidence.”
Adam Oldfield, chief revenue officer at Phoebus Software explained it’s good to start the year with some positive news as mortgage rate cuts will be encouraging for those that were switched to standard variable rates last year.
The waiting game may have paid off for some, but the increase from the historically low-interest rates up to the current average SVR of over eight percent will have put huge pressure on many households.
Lenders will no doubt be inundated with borrowers looking to fix a new rate as quickly as possible.
He continued: “Unfortunately, that massive jump in monthly payments will have been too much for some borrowers, which was borne out by the rise in mortgage defaults towards the end of last year.
“Then we hear that our Prime Minister is considering introducing a 99 percent mortgage to help first-time buyers onto the property ladder.
“When we have such a huge problem with supply in the UK, you have to wonder whether this ‘vote winning’ tactic is really what is needed in the long-term?”
