Mortgage approvals hit two-year high - Bank of England

Mortgage approvals hit a two-year high in October, Bank of England data showed on Friday, as the UK housing market continued to regain ground.

According to the BofE’s latest Money and Credit report, net mortgage approvals for house purchase – a key indicator of future borrowing – rose to 68,303 in October, the highest level since August 2022.

The fourth consecutive monthly rise, it was also well above expectations. A Reuters poll of economists had forecast a fall to 64,500.

Net borrowing of mortgage debt by individuals, meanwhile, increased by £0.9bn to £3.4bn, also ahead of expectations.

The UK housing market was already battling surging inflation, high interest rates and the cost of living crisis when Liz Truss’s disastrous Budget in autumn 2022 caused mortgage rates to spike.

However, over the last two years economic conditions have improved and mortgage rates have fallen. The Monetary Policy Committee has also cut rates twice this year, to 4.75%.

The effective interest rate – the actual interest paid – on newly drawn mortgages decreased by 15 basis points in October, to 4.61%, the lowest since May 2023.

Matt Swannell, chief economic advisor to the EY Item Club, said: “First, quoted mortgage rates fell markedly between May and October. Second, forward-looking buyers will have been keen to set purchases in train before the temporary increase in stamp duty thresholds expires at the end of March.

“Market pricing has been volatile over the past couple of months. However, swap rates are higher than they were in late summer, and this will likely feed into slightly higher mortgages over the coming weeks.”

The report coincided with provisional data from HM Revenue and Customs showing an estimated 100,410 residential property transactions in October, a 21% surge on the same month a year earlier and 10% improvement on September.

Nicky Stevenson, managing director at estate agent Fine & Country, said the rise signalled “strong momentum in the housing market” despite caution around last month's Budget.

“As we approach 2025, the property market is poised to remain steady with a cautious but optimistic outlook,” she noted.

The BofE’s monthly Money and Credit report also showed net consumer credit borrowing by individuals eased slightly, to £1.1bn from £1.2bn a month previously.

While net borrowing on credit cards increased, it was offset by a fall in other forms of consumer credit, such as car dealership finance and personal loans.

Household deposits with banks and building societies, meanwhile, rose by £20.2bn, the largest increase since December 2020.