Net residential mortgage approvals decreased by 600 to 65,500 in February, following a decrease of 400 in January, according to the latest Money and Credit statistics from the Bank of England.
Approvals for remortgaging with a different lender also fell by 800 to 32,000 in February, following an increase of 2,100 in January.
This comes as the average interest rate on newly drawn mortgages increased by 2 basis points, to 4.53% in February. The rate on the outstanding stock of mortgages also rose to 3.87% in February, up from 3.81% in January.
Santander was one lender to withdraw its sub-4% five-year fixed rate in February, citing an increase in five-year market swap rates.
The Bank of England figures also show that net borrowing of mortgage debt decreased by £0.9 billion to £3.3 billion in February, following an increase of £0.8 billion in January. The annual growth rate for net mortgage lending was little changed at 1.9% in February.
However, gross lending increased to £24.3 billion in February, from £21.7 billion in January, and was the highest since November 2022. Gross repayments also increased in February, to £19.8 billion from £16.3 billion.
Karim Haji, global and UK head of financial services at KPMG, commented: “The surprising dip in mortgage approvals against a backdrop of lower inflation, interest and mortgage rates, and the upcoming stamp duty increase, suggests that affordability continues to put pressure on household finances. High deposit requirements may also be impacting first-time buyers’ appetites.
“Lenders must offer the right level of support to help those struggling financially both now and in the challenging months ahead.”
Richard Pinch, senior director at Broadstone, said: "Continued economic uncertainty, stickier inflation and therefore interest rates, plus the end of the stamp duty holiday all appear to be conspiring to deter home buyers with both mortgage borrowing and approvals falling in February. Despite the strength of the property market in terms of pricing, it is clear that there is still considerable fragility in consumer confidence at the minute.
“As global economies hold their breath as they wait to see the detail and impact of President Trump’s tariffs on Wednesday, it seems unlikely that sentiment is likely to strengthen in the near-term although there is still the prospect of at least a couple of interest rate cuts from the Bank of England.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, added: “With mortgage approvals falling only slightly in February, it’s steady as she goes for the market.
“The effective interest rate paid on new mortgages rose to 4.53% although since then, we have seen lenders trimming their mortgage rates. Further reductions from the Bank of England will help improve confidence and affordability, particularly once the stamp duty concession has ended.
“Remortgaging numbers dipped, perhaps suggesting that borrowers are sticking with their existing mortgage provider rather than shopping around and going through the hassle of applying to another lender."
