"We haven’t quite seen the reduction in mortgage rates that you might expect following August’s base rate reduction, however, it remains very early days"
- CEO of Octane Capital, Jonathan Samuels
Net mortgage approvals for house purchase rose from 62,500 in July to 64,900 in August, the highest level since August 2022, according to the latest Money and Credit statistics from the Bank of England.
Similarly, approvals for remortgaging with a different lender increased from 25,200 to 27,200 in August, after five consecutive month-on-month decreases.
Net residential mortgage borrowing totalled £2.9 billion in August, compared to £2.8 billion in July. The annual growth rate for net mortgage lending rose for the sixth consecutive month, from 0.6% in July to 0.7% in August, the highest since August 2023 (1.0%). Gross lending saw an increase of £0.3 billion to £19.9 billion in August, while gross repayments increased by £1.3 billion over the same period, to £18.4 billion.
The average interest rate paid on newly drawn mortgages was 4.84% in August, up from 4.81% in July, despite the Bank of England reducing Bank Rate to 5% on August 1st. The rate on the outstanding stock of mortgages also rose by 3 basis points, to 3.72% in August.
CEO of Octane Capital, Jonathan Samuels, commented: “Mortgage approval levels have continued to climb for the third consecutive month which signals that buyers are returning to the market at mass in order to make their move this side of Christmas.
"We haven’t quite seen the reduction in mortgage rates that you might expect following August’s base rate reduction, however, it remains very early days and what we have seen is a significant cut to rates across all lending segments when compared to this time last year.
"This increased level of borrowing affordability has come as a result of increased market stability following the Bank of England’s original decision to hold rates at 5.25% in September of last year and, with market conditions continuing to improve, it’s only a matter of time before we see further rate reductions."
Nathan Emerson, CEO of Propertymark, said: “The housing market has seen remarkable progress throughout the year and the economy stands in a far stronger position as we head towards 2025. All eyes will be on the Bank of England for their next interest rates decision, but also on the UK Government regarding the forthcoming budget and what this might mean for buyers and sellers. The housing market remains sensitive to an ever-expanding population, so it remains essential we see government house building targets jump-started into action as soon as possible."
Ryan Davies, strategy director at Bluestone Mortgages, added: “Today’s uptick in mortgage approvals indicates a road to recovery for the UK mortgage market. With interest rates having fallen from their historic high, and the mortgage rate war between lenders continuing to gather pace, the outlook remains bright.
