UK mortgage approvals rise as interest rate cuts make borrowing cheaper

Mortgage approvals for house purchases climbed to 62,000 in July, the highest figure since September 2022, according to the Bank of England — another signal of recovering confidence in the housing market as Threadneedle Street starts to cut down its base interest rate.

Net borrowing of mortgage debt increased to £2.8bn in July, marking the highest level since late 2022.

The start of August saw the Bank of England cut its base rate by 0.25% from 5.25% to 5% — the first rate cut in four years. It was voted through by the nine-member monetary policy committee by a narrow margin.

“We expect the reduction of the Bank of England’s base rate at the start of August to further stimulate demand in the market as we enter the busy Autumn period," said Paul Matthews, senior director, risk, at independent consultancy Broadstone.

“However, we do not expect rates to significantly reduce — at least, to nowhere near levels seen before the hiking cycle — so lenders will still need to exercise caution around affordability as we have seen large increases in mortgage arrears recently.”

Read more: UK house prices surge at fastest pace since December 2022

Figures from HMRC released on Friday echoed the trend of buoyancy in the market. New data shows the provisional seasonally adjusted estimate of the number of UK residential sales in July was 90,630 — 7% higher than July 2023 and less than 1% lower than June 2024.

Meanwhile, the provisional, non-seasonally adjusted, estimate of the number of UK residential transactions in July was 96,800 — 13% higher than July 2023 and 7% higher than the previous month.

And, while transactions and mortgage approvals are on the up, house prices also rose at the fastest pace since December 2022 in July.

Annual growth rate picked up to 2.4%, from 2.1%, according to new data from Nationwide.

However, on a monthly basis, its figures showed a 0.2% dip in prices, which it said was a result of “seasonal factors”. That meant the average price of a UK home was £265,375 in July, some £950 lower than the previous month.

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Values were still around 3% lower than the record highs recorded in the summer of 2022, at the end of the pandemic property boom.

Nationwide's chief economist Robert Gardner said the housing market remained subdued but was coping with the increase in interest rates.

“While house price growth and activity remain subdued by historic standards, they nevertheless present a picture of resilience in the context of the higher interest rate environment and where house prices remain high relative to average earnings (which makes raising a deposit more challenging),” he said.

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