Mortgage approvals surge in March - Bank of England

Mortgage approvals jumped in March, official data showed on Thursday, indicating that the UK housing market was starting to stabilise.

According to the Bank of England’s latest money and credit report, mortgage lending to individuals fell from a net flow of £0.7bn in February to net zero in March, the lowest level outside of the pandemic since June 2011.

But net mortgage approvals – a key indicator of future borrowing – rose significantly, to 52,000 from 44,100 in February. Consensus had been for around 46,000 net mortgage approvals.

The effective interest rate - the actual interest rate paid - on newly drawn mortgages increased by 17 basis points to 4.41%.

The UK housing market has endured a difficult few months, after the government's disastrous mini-budget in September caused turmoil across markets, and led to a spike in mortgage rates.

The BoE’s monthly report also showed households withdrew £4.8bn from banks and building societies in March, a sharp reversal of the £2.6bn in net deposits seen a month previously. It was the first decline in nearly five years.

At the same time, a total of £3.5bn was deposited in National Savings and Investment accounts, up from £2bn in February and the highest since September 2020. NS&I accounts are not included within household deposits with banks and building societies.

Despite that, households’ total liquid assets – deposits with bank and building societies as well as cash stored in NS&I accounts – fell by £1.3bn, well below the £4.6bn average increase seen in the two years prior to the pandemic.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Households and businesses have become less willing to hold bank deposits since the collapse of Silicon Valley Bank on 10 March.

“In addition, the £3.5bn rise in cash in NS&I accounts show that some households have shifted savings to benefit from a full government guarantee, as opposed to only the £85,000 protection offered to bank depositors.

“So funding conditions for banks have deteriorated, suggesting they likely will increase interest rates for both deposits and new loans over the coming months to steady the ship.

“We think a bank run triggered by concerns over solvency remains very unlikely. But financial conditions have undoubtedly tightened, strengthening the case for the Monetary Policy Committee to stop raising the bank rate after next week’s likely 25 basis point increase.”

Consumers also borrowed an additional £1.6bn of consumer credit in March, net, more than the £1.5bn borrowed in February and well above expectations for around £1.2bn.