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UK mortgage approvals rose more than expected in January, reaching their highest level since October 2022 as borrowing costs fell, according to Bank of England data pointing to a recovery in the property market at the start of the year.
Net mortgage approvals for home purchases rose from 51,500 in December to 55,200 in January, the highest level in 15 months and higher than the 52,000 forecast by economists polled by Reuters.
The Bank of England said January's “effective” interest rate – a measure of the weighted average cost – on newly drawn down mortgages fell by 9 basis points to 5.19 per cent. This represents the second consecutive monthly decline in the rate, reaching its lowest level since October 2023.
The data, a snapshot of the health of the housing market, indicates that the housing market is recovering as the pressure caused by the high borrowing costs seen over the past two years eases.
The Bank of England also released figures showing consumer credit rose more than expected to £1.9bn in January, from £1.3bn the previous month, adding to signs of a recovery in spending.
Economists said the improved data would help drive a broader economic recovery after the UK slid into recession at the end of last year.
Ashley Webb, an economist at Capital Economics, said the Bank of England figures indicate “pressure on consumer spending and the housing market due to rising interest rates.” [was] Ease,” he said, adding: “The recession will be over soon, if it isn’t already.”
The average interest rate on a mortgage priced for a two-year fixed deal with a loan-to-value ratio of 60 per cent fell to 4.62 per cent in January from 4.9 per cent the previous month and is the lowest since April 2023, according to the Bank of England. . Interest rates on three-year and five-year reforms also continued to fall.
Mortgage rates have fallen from their summer peak in anticipation that the Bank of England will start cutting interest rates this year from a 16-year high of 5.25 per cent.
However, flat services inflation and strong wage growth data in February led to some adjustments in market interest rate expectations, prompting some mortgage lenders to raise borrowing costs slightly.
In the past few weeks, “interest rates have moved up a bit which has led some people to pause as doubts grow about the stability of this recovery,” said Rita Kohli, managing director at brokerage The Mortgage Stop.
But Tom Bell, head of UK housing research at Knight Frank, said he expects demand “will get stronger with inflation”. [came] “Under Control” and expected home prices to rise by 3 percent this year.
