The Bank of England has reported a significant increase in mortgage approvals for home buyers, reaching the highest level since the mini-budget delivered under former Prime Minister Liz Truss. In July, there were 62,000 approvals, the most since September 2022, which saw 65,100 approvals—a notable leap from 60,600 in June, and the highest since September 2022.
A Housing Market Rollercoaster Since September 2022
The housing market has been on a wild ride since September 2022, when then-Chancellor Kwasi Kwarteng unveiled a “growth plan” that sent mortgage rates skyrocketing. In the wake of this announcement, the number of mortgage approvals plummeted as buyers grappled with higher costs.
However, the tides are turning. Recent weeks have seen a steady decline in mortgage rates, culminating in a 0.25 percentage point cut to the Bank of England's base rate earlier this month, bringing it down to 5%. This easing of financial pressure is likely contributing to the up tick in mortgage approvals.
Decline in Remortgaging Approvals
While reporting on the Bank’s Money and Credit, Jaime Turner commented on the growth of house purchase approvals, which increased from 60600 in June to 62000 in July. Remortgaging, which is a process of switching lenders, was however on the contrary on the downturn with approvals declining from 27300 in the previous month to 25100.
Also, for August, Nationwide Building Society reported a seasonally adjusted decline in month-on-month UK house prices of 0.2% for August. However, annual house price growth was also up. Average prices increased by only 2.4% in the year, which is the highest coefficient seen since December 2022.
A Glimmer of Hope for Home Buyers?
Economists are taking note. Thomas Pugh, from RSM UK, has expressed optimism about the market's trajectory, suggesting that the July figures indicate a positive trend that could persist throughout the year.
Despite a slight dip in UK house prices in August, Pugh believes this is just a temporary blip. As household incomes rise and interest rates continue to fall, affordability is expected to improve, potentially driving prices higher.
Pugh isn't alone in his optimism. Chief UK economist Rob Wood at Pantheon Macroeconomics said: “We expect mortgage approvals to gain further ground, rising to 65,000 in the next few months as mortgage interest rates decline in response to Bank of England interest rate cuts.”