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The number of mortgage approvals in the UK reached its highest level in 18 months in March. This comes from official figures which suggest that the property market continues to recover despite recent interest rate hikes.
Net mortgage approvals rose to 61,300 last month from 60,500 in February, the Bank of England said on Tuesday.
Although the number was slightly below the 61,500 predicted by economists in a Reuters poll, it was the highest since September 2022 and marked the sixth straight monthly increase.
Mortgage approvals fell to a low of 39,800 in January 2023 after higher interest rates hurt demand. They are now closer to the 2016-19 monthly average of 66,000, suggesting the market is normalizing, although the cost of home loans has risen steadily in recent months.
Swap rates, on which mortgage prices are based, rose in response to markets reassessing when they expect the BoE to start raising interest rates from a 16-year high of 5.25 due to disappointing inflation data percent to reduce.
“Given the recent increases in mortgage rates, it was reassuring to see mortgage approvals increase in March,” said Anthony Codling, analyst at RBC Capital Markets. “The UK property market is slowly recovering, even in the face of a stubborn economy, mortgage rates and uncertainty over the election date.”
In March, the average two-year listed mortgage with a 60 percent LTV rose to 4.81 percent from 4.62 percent in February, but remained well below its recent peak of 6.22 percent in July 2023, BoE data showed.
Several lenders, including NatWest and HSBC, increased interest rates on a range of mortgage products last week. TSB, Nationwide, NatWest and Santander have announced increases this week.
Aaron Strutt, director of broker Trinity Financial, said that while the increases were “not huge, they were still enough to significantly increase monthly repayments”.
“At the moment, the cheapest interest rates are just under 4.4 percent, which is not bad, but higher than many borrowers are willing to pay,” he added.
The BoE said the “effective” interest rate – the actual interest rate paid, which is several months behind advertised rates – on new mortgages fell 0.17 percentage points to 4.73 percent in March, the lowest level since July 2023.
The BoE figures also showed that the supply of money in the economy, known as M4ex, increased by 12.1 billion pounds in March, the highest inflow since October 2022.
The M4ex money supply includes banknotes and coins in public circulation, as well as all pound deposits held by the rest of the private sector in UK banks and building societies.
Meanwhile, borrowing rose by £1.6 billion in March, up from £1.4 billion in February, while companies raised £10.2 billion in finance, the largest amount of net funding since May 2020.
Ashley Webb, an economist at research firm Capital Economics, said the central bank’s data was “further evidence that the burden of high interest rates is beginning to ease and supports our view that the economy recovered in the first quarter” after A technical recession had entered at the end of 2023.