Mortgage approvals continue to rise - BoE

Mortgage approvals pushed higher in January, official data showed on Thursday, hitting the highest level since the government's disastrous mini budget in 2022.

According to the Bank of England’s latest Money and Credit report, net mortgage approvals rose to 55,200 last month from December’s upwardly-revised 51,500.

That was above consensus expectations of 52,000, and the highest since October 2022.

Meanwhile, the effective interest rate - the actual interest paid - on newly-drawn mortgages fell by nine basis points to 5.19%.

The UK housing market was already grappling with record inflation, rising interest rates and the cost-of-living crisis when the government’s disastrous mini-budget of September 2022 sent mortgage rates soaring. However, in the last year rates have started to moderate, helping demand recover.

The BoE’s monthly report also showed that individuals repaid net £1.1bn of mortgage debt during the month, compared to £0.9bn in December.

Households’ total liquid assets, meanwhile, increased by £0.6bn last month. Total liquid assets include deposits with banks and building societies as well as cash in National Savings and Investments accounts.

Net borrowing of consumer credit by individuals rose to £1.9bn from £1.3bn, above both consensus - for £1.5bn - and the average of the last six months of £1.6bn.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Households have started this year better than they ended in 2023, with reviving consumer credit flows supporting January’s rebound in retail sales.

"That said, consumers continue to manage their finances cautiously.

"The outlook for consumers, however, continues to brighten. The jump in the number of mortgage approvals for house purchase will lead to an increase in borrowing flows in two-to-three months, when those people move house.

"More broadly, we think households will be willing to spend more this year."

Martin Beck, chief economic advisor to the EY Item Club, said: "Mortgage approvals increased to a 15-month high. But in net terms, individuals continued to repay mortgage debt.

"This isn’t the only indication that signs of life in the housing market shouldn’t over-emphasised. Mortgage approvals were still a tenth below the 2022 average, reflecting the fact that while mortgage affordability has improved in recent months, it’s still very stretched.

"Nonetheless, an improving macroeconomic climate, with cost of living pressures easing and monetary policy likely to be loosened soon, should support a further recovery in mortgage demand."