"Following November's post-budget dip in mortgage approvals, today’s figures offer a more optimistic outlook for the market as we move into 2025."
- Tony Hall, head of business development at Saffron for Intermediaries
Residential mortgage borrowing rose by £1.0 billion to £3.6 billion in December, following a fall in November, according to the latest Money and Credit statistics from the Bank of England.
The annual growth rate for mortgage lending rose to 1.5% in December from 1.3% in November, continuing the upward trend observed since April 2024.
Gross lending increased to £21.3 billion in December, from £20.8 billion in November, while gross repayments increased to £18.5 billion from £18.1 billion.
Residential mortgage approvals increased slightly to 66,500 in December, compared to a decrease of 2,300 in November. Approvals for remortgaging with a different lender decreased by 700 to 30,500 in December, falling for a second consecutive month (Chart 1).
The average interest rate on newly drawn mortgages was down by 3 basis points, to 4.47% in December, the lowest since April 2023.
Tony Hall, head of business development at Saffron for Intermediaries, commented: “Following November's post-budget dip in mortgage approvals, today’s figures offer a more optimistic outlook for the market as we move into 2025. With inflation easing to 2.5%, slightly lower than in November, there’s growing anticipation that if it follows this downward trajectory, a base rate cut could be on the horizon. This would mark a shift that would create much more favourable conditions for prospective buyers and drive an increase in mortgage lending and approvals.
“Last week’s discussion around mortgage regulation reforms, including how much first-time buyers are allowed to borrow, is also encouraging. Right now, lenders are limited in how much of their lending can go beyond 4.5x income, which blocks many buyers who can clearly afford higher multiples. More flexibility would help lenders say yes to the right cases, but it’s important to avoid the mistakes of the pre-financial crash era and ensure lending remains responsible. That said, the bigger challenge is tackling the housing shortage – we really need the Government to focus on building more homes to keep up with demand.”
Nathan Emerson, CEO of Propertymark, added: “Many people are likely to have been working with urgency to get their mortgages approved to help ensure they can complete ahead of Stamp Duty threshold increases in England and Northern Ireland before the start of April.
“It has been an upbeat start to the year overall and very much spurred on by some lenders reducing rates by up to 0.35% across many of their fixed rate remortgage products. Our Propertymark member agents have also in turn also witnessed an uplift of around 10% in activity from prospective buyers.
“Depending on what happens with inflation as the year progresses, hopefully the Bank of England will look to reduce the base rate further, which will likely translate into more affordable mortgage products and further stimulate the housing market.”
