UK mortgage approvals rise to highest since August 2022

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UK mortgage approvals beat expectations last month to rise to the highest since August 2022, highlighting the impact of falling home loan costs as they retreat from last year’s peaks.

Net mortgage approvals for house purchases increased to 68,300 in October, up 2,200 on the previous month, according to data published by the Bank of England on Friday.

The figure was higher than the 64,500 forecast by economists in a Reuters poll and the highest since August 2022, when net mortgage approvals stood at 72,200.

Approvals for remortgaging with a different lender also rose for the third consecutive month to 31,400 in October, up 500 on September, the BoE said.

Alice Haine, personal finance analyst at wealth manager Evelyn Partners, said the rise was “thanks to a surge in buyers and new listings following the first interest rate cut in the summer”.

Quoted mortgage rates have fallen from their summer 2023 peaks, as easing price pressures paved the way for the Bank of England to cut interest rates, driving down home loan costs.

The quoted rate on a two-year fixed rate mortgage with 60 per cent loan to value dropped to 4.2 per cent in October, from a peak of more than 6 per cent in August last year, according to the BoE.

The central bank has cut rates twice this year, in August and this month, as inflation dropped from its multi-decade high of 11.1 per cent in October 2022 to 2.3 per cent last month.

Financial markets expect the BoE to hold rates at 4.75 per cent at its next meeting in December, with policymakers vowing to follow a “gradual” approach to easing.

Richard Merrett, managing director at mortgage broker Alexander Hall, said October’s mortgage approval figures “demonstrate that, despite the looming uncertainty of the autumn Budget, buyers continued to enter the market with intent, with a fifth consecutive monthly increase recorded”.

The BoE also reported that the “effective” interest rate — the actual interest paid — on newly drawn mortgages fell by 15 basis points to 4.61 per cent in October, the lowest since May 2023.

Separate data from HM Revenue & Customs on Friday showed that there were more than 100,400 residential property transactions in the UK in October, up 10 per cent on September and 21 per cent higher compared with October 2023.

Nick Leeming, chair of estate agency Jackson-Stops, said the Labour party’s landslide victory in the July general election had “invigorated the market, encouraging buyers to act swiftly, especially with the looming autumn Budget prompting a rush to finalise deals before any potential policy shifts”.

Meanwhile, the BoE figures showed consumers remained cautious about spending last month.

Households’ deposits with banks and building societies rose by £20.2bn in October, the largest increase since December 2020, according to the central bank.

The rise was driven by households depositing an additional £14.4bn into instant access accounts. The BoE said that both increases were higher than any pre-Covid figures on record.

Tomasz Wieladek, chief European economist at investment company T Rowe Price, said Friday’s figures showed “a buoyant housing market on the one hand, but also a degree of household caution”.