UK mortgage approvals hit 25-month high
UK mortgage approvals hit their highest level in more than two years in September, Bank of England data has shown.
Net mortgage approvals, which are an indicator of future borrowing, increased by 700 to 65,600 in September, the highest level since 72,000 in August 2022.
Approvals for remortgaging increased by 3,100 to 30,800 in September.
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Borrowing costs on new mortgages fell during the month. The ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages decreased by eight basis points, to 4.76 per cent in September.
However, the rate on existing mortgages increased slightly to 3.74 per cent, from 3.72 per cent in August.
“UK net mortgage approvals edged up in September – the highest level in more than two years – after the interest rate cut at the start of August lured more buyers back to the market and fears around a hike in the rate of Capital Gains Tax (CGT) on property sales spurred second homeowners and buy-to-let landlords to sell up,” said Alice Haine, personal finance analyst at online investment platform Bestinvest by Evelyn Partners.
Despite the uptick in mortgage approvals, net mortgage lending fell by £0.3bn to £2.5bn in September, following three consecutive monthly increases.
“Despite the surge in buyers and new listings energising the residential property market, net mortgage lending eased in September, which may reflect the high number of transactions carried out by first-time buyers who are likely to be purchasing smaller homes,” Haine said.
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Chancellor Rachel Reeves is unveiling her inaugural Budget on 30 October, which is likely to contain a plethora of tax hikes to fill what Reeves declared a £22bn economic black hole inherited from the Conservatives.
Reports suggest second homes will be exempt from a hike in the CGT rate, although share sales are likely to be subject to higher tax.
“Concerns over a hike in the CGT rate on second homes or buy-to-lets – something that has fuelled a surge in the number of landlords and second homeowners selling up to avoid a heavy tax bill – may prove unfounded, but the increase in listings has boosted the number of homes available for first-time buyers looking to get a foot on the ladder,” Haine said.
“Thanks to improving borrowing conditions, this is starting to filter through fully to the mortgage market. The effective rate on newly drawn mortgages decreased by 8 basis points to 4.76 per cent in September, signalling that the financial pressures of the past few years are finally starting to ease for borrowers.
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“Borrowing costs remain relatively high, however, and who gains and who loses depends on the type of mortgage someone has signed up for and which stage of the home ownership journey they have reached. While first-time buyers and existing homeowners on tracker products may by buoyed by the prospect of better rates this year, homeowners locked into expensive fixed-rate deals with some time left to run won’t feel any respite until their product expires.
“Any borrowers with cheap fixed-rate loans – secured before the BoE began its tightening cycle in December 2021 – set to expire before the end of next year are also bracing for a jump in mortgage costs when they eventually remortgage. This was evident in the increased rate for the outstanding stock of mortgages, which edged up to 3.74 per cent from 3.72 per cent the previous month, as more people rolled off low-cost fixed rate deals.”
