UK mortgage approvals are on the rise

For the first time in six months, UK mortgage approvals are on the rise

Amid the signs of the demand for property collapsing, as seen last autumn, the demand for mortgage approvals surged for the first time in six months in February.

As per the statistics revealed by the Bank of England, home loan approvals increased from 39,647 in January to 43,536 in February, showing a reversal of a downward trend since 2022.

However, analysts argue that there was no prospect for the market to flourish as witnessed during and after the pandemic, even though interest rates are increasing. One of the analysts pointed out that, compared to 2022, the activity would be 30% lower in 2023.

The Bank reported that net mortgage lending fell to its lowest level since April 2016 in February, except for the time the economy was shut down due to the COVID pandemic, from £2 billion in January to £0.7 billion. This is a sign of the tumultuous circumstances that existed during Liz Truss’s brief premiership last autumn. For approvals to become actual house loans, it often takes many months.

UK property analyst at the consultancy Capital Economics, Andrew Wishart, revealed that: “Reflecting the partial unwinding of the spike in mortgage rates following the ‘mini-budget,’ mortgage approvals rose to their highest level for three months in February. However, with mortgage rates unlikely to fall much further in the near term, lending will remain weak. Our forecast is that approvals will be 30% lower this year than in 2022.”

The cost of servicing a mortgage was increasing as the Bank raised official interest rates for the 11th consecutive time to 4.25% last week. The effective home loan rate, or the interest paid by a new borrower, increased by 0.36% to 4.28% last month.

The chief economic adviser to the EY Item Club, Martin Beck, stated that “the latest household lending data indicated continued weakness in housing market activity, albeit with signs that the worst may be in the past.” He further added that the approvals recorded compared to 2022 were still well below the average of 62,677.

According to the monthly money report and credit reports from the Bank of England, consumers are borrowing more money to pay for their purchases. Consumer credit increased by £1.4 billion in February, almost evenly split between credit cards and other types of borrowing.

- Published By Team Timeswire

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