Mortgage approvals have risen (Image: profoto1 via Getty Images)
The number of mortgage approvals for house purchases, which is an indicator of future borrowing, increased to 58,200 in June, from 56,600 in May — but remained below an average of around 61,400 over the previous six months, according to the Bank of England. Approvals for remortgaging, which only capture remortgaging with a different lender, also increased to 34,200 in June, from 33,800 in May.
Meanwhile, net borrowing of mortgage debt by individuals increased to £7.7 billion in June, from £3.3 billion in May, above the previous six-month average of £4.9 billion. The ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages increased to 4.35% in June, from 4.22% in May. The rate on the outstanding stock of mortgages was 3.96% in June, up from 3.92% in May.
Responding to the data, Shaun Sturgess, director of Swansea-based Sturgess Mortgage Solutions, said: “Demand for mortgages started to recover in June from the uncertainty caused by the war in the Middle East during the three previous months. But just as some degree of normality was starting to return to the market, renewed tensions have seen rates increase again in recent weeks.
“This once again shows the need for borrowers to lock into rates at their earliest convenience just in case the market suddenly moves against them, as it has in July. Locking in protects you against rate rises and a good broker will switch you onto a lower rate if one becomes available.”
Jamie Elvin, director of London-based Strive Mortgages, said “this latest Bank of England data suggests mortgage demand remains surprisingly resilient despite higher borrowing costs”.
Rates have been up and down (Image: Getty Images)
He continued: “Purchase approvals rebounded to 58,200 in June and remortgaging activity also strengthened, indicating buyers and existing homeowners are still active. However, approvals remain below the recent six-month average, while effective mortgage rates continue to edge higher.
“Overall, demand is holding up rather than accelerating, supported by easing expectations for interest rates, but still constrained by affordability pressures. Unless borrowing costs fall more decisively, expect steady rather than booming mortgage activity.”
Tracey Dixon, owner of Cardiff-based Pure Mortgage and Protection, added: “These figures show that mortgage demand is holding up remarkably well despite ongoing affordability pressures. Buyers aren’t waiting for perfect conditions anymore – they’re adapting to the market that’s in front of them. I’m seeing more clients accept that life doesn’t stop for interest rates.
“Whether it’s a growing family, a new job or a relationship change, people still need to move. The market isn’t booming, but it’s proving far more resilient than many expected. If a mortgage is affordable today and suits a person’s long-term plans, waiting indefinitely for the ‘perfect’ rate can end up costing more than getting on with life.”
Emma Jones, managing director of Whenthebanksaysno.co.uk, said the soaring price of oil last week had resulted in major lenders such as Santander and Halifax increasing rates this week.
She added: “Amid ongoing tensions in the Middle East, the price of oil has been on the rise again and that risks feeding inflation, which could see interest rates rise or at least stay higher for longer. Lenders are taking that into account along with wider uncertainty around the conflict.
“Markets and lenders are increasingly nervous about inflation and that is now starting to really hit borrowers here in the UK with higher mortgage rates. Tomorrow’s Bank of England interest rate decision will be closely monitored.”
Samuel Mather-Holgate, managing director of Swindon-based Mather and Murray Financial, said “these figures look less like a housing market recovery and more like a patient whose condition has stopped deteriorating”.
He added: “Mortgage demand is holding up, but only just. Approvals ticked higher in June, yet they are still below the recent six-month average, which suggests buyers are edging back rather than flooding in.
“The jump in net borrowing is notable, but with newly drawn mortgage rates rising to 4.35%, affordability is still doing a lot of damage. The market needs a proper shot in the arm: lower borrowing costs, more confidence and greater certainty on household finances.
“For now, demand is resilient, but fragile. People still want to move, but many are doing the sums twice and deciding whether the leap is worth it.”
