"We’ve seen swap rates start to creep up based on the likelihood that the base rate will remain at 5.25% for the immediate future."
- CEO of Octane Capital, Jonathan Samuels
Net mortgage approvals for house purchases rose from 49,300 in November to 50,500 in December, the third consecutive monthly increase, according to the latest Money and Credit statistics from the Bank of England.
Net approvals for remortgaging with a different lender also increased from 25,700 in November to 30,800 in December.
Individuals repaid, on net, £0.8 billion of mortgage debt in December compared to net zero in November. The flat annual growth rate for net mortgage lending was recorded for the first time since the series began in March 1994.
In addition, gross lending continued to increase, from £16.4 billion in November to £17.2 billion in December. Gross repayments also increased, from £15.6 billion to £19.1 billion over the same period.
The ‘effective’ interest rate paid on newly drawn mortgages fell by 6 basis points, to 5.28% in December - the first drop since November 2021. However, the rate on the outstanding stock of mortgages increased by 9 basis points, from 3.27% in November to 3.36% in December.
Reece Beddall, sales and marketing director at Bluestone Mortgages, commented: “The increase in mortgage approvals at the close of 2023 reflects what we saw on the ground, where buyers became increasingly more confident in the market. This was being driven by a decline in inflation, the Bank of England maintaining interest rates, and lower mortgage rates compared to earlier in the year. We are seeing this momentum into January, marked by heightened competition among lenders as they continue to cut rates, boosting buyers’ confidence."
Adam Oldfield, chief revenue officer at Phoebus Software, said: “It’s good to start the year with some positive news, mortgage approvals up and consumer credit down, even in the month before Christmas. The recent rate cuts, the latest now below 4% from the Nationwide, will be encouraging for those that were switched to standard variable rates last year. The waiting game may have paid off for some, but the increase from the historically low interest rates up to the current average SVR of over 8% will have put huge pressure on many households. Lenders will no doubt be inundated with borrowers looking to fix a new rate as quickly as possible.
“Unfortunately, that massive jump in monthly payments will have been too much for some borrowers, which was borne out by the rise in mortgage defaults towards the end of last year. When a UK minister has to quit his job because he can’t afford his mortgage you know the same problem must be being felt across the country. Then we hear that our Prime Minister is considering introducing a 99% mortgage to help first-time buyers onto the property ladder. When we have such a huge problem with supply in the UK, you have to wonder whether this ‘vote winning’ tactic is really what is needed in the long-term?”
CEO of Octane Capital, Jonathan Samuels, added: "Homebuyers are continuing to grow in confidence, buoyed by a reduction in mortgage rates in recent months. However, these mortgage rate reductions were based on previous expectations across the swap market that the Bank of England will reduce the base rate this week.
"These expectations have been changing in recent weeks and we’ve seen swap rates start to creep up based on the likelihood that the base rate will remain at 5.25% for the immediate future.
"As a result, mortgage approvals have climbed, but not at the rate forecast, and we anticipate that should mortgage rates start to climb again in February it could further dampen the enthusiasm that has been shown by buyers in recent months.”
