Mortgage lending picked up pace in June, according to the latest Money and Credit statistics from the Bank of England, signalling renewed activity in the housing market as borrowers respond to marginally cheaper mortgage rates and a modest loosening of regulatory restrictions.

Net borrowing of mortgage debt by individuals rose by £5.3 billion in June, up from £2.2 billion in May. Mortgage approvals for house purchases also edged higher, increasing by 900 to 64,200, while remortgage approvals rose by 200 to 41,800 – the highest since October 2022.

Gross mortgage lending jumped to £23.9 billion, up from £20.6 billion a month earlier, with gross repayments also rising to £18.8 billion.

Consumer credit borrowing also accelerated, with households borrowing £1.4 billion in June compared to £0.9 billion in May. Credit card debt accounted for £0.7 billion of that figure, up from £0.2 billion, while other forms of consumer credit remained broadly flat.

The rise in housing market activity comes as average mortgage rates continue to soften, providing some relief to buyers who have faced the sharpest interest rate tightening cycle in over a decade. The effective interest rate paid on new mortgages fell to 4.34% in June, down slightly from the previous month, while the rate on outstanding mortgages nudged higher to 3.88%.

Industry figures were broadly encouraged by the latest data but cautioned that affordability remains a significant hurdle.

Colin Bell, chief operating officer and co-founder at Perenna, said the combination of rising mortgage approvals and seasonal price reductions had lowered some of the barriers to home ownership. However, he warned that mortgage affordability rules, stamp duty policy and a lack of flexible products continued to keep ownership out of reach for many.

He welcomed interim policy changes introduced as part of the Financial Conduct Authority and Prudential Regulation Authority’s Mortgage Rule Review, allowing lenders to overlook the loan-to-income (LTI) flow cap on a case-by-case basis. “While this will be a critical lifeline to first time buyers with stable incomes… it’s not exactly a game changer,” he said. “Large swathes of the industry will remain unaffected.”

GROWING CONFIDENCE

Tomer Aboody, director at MT Finance, said the increase in borrowing reflected growing confidence among buyers. “With rising borrowing numbers when it comes to mortgage approvals and debt, we are seeing how lower mortgage rates are helping fuel confidence,” he said.

He argued that another base rate cut later this year could provide further momentum, but warned that high stamp duty and other taxes continued to suppress transaction volumes.

Mortgage broker Mark Harris, chief executive of SPF Private Clients, said the market’s resilience remained evident. “With mortgage approvals continuing to increase, the underlying resilience of the housing market is in evidence,” he said. While some lenders have reduced rates further since June, Harris noted that the overall cost of borrowing remains elevated. He pointed to a jump in remortgaging as borrowers seek to minimise costs.

Jeremy Leaf, a north London estate agent and former RICS residential chairman, said approvals offered a clearer insight into future market trends than house prices. “On the ground, we are seeing the relaxation of borrowing rules helping to support resilience among buyers and sellers,” he said. “However, given the over-supply of stock… vendors need to be competitive if they wish to attract attention.”

While activity is increasing, the latest data also reflects the tentative nature of the recovery. Borrowing by private non-financial corporations fell slightly to £1.0 billion in June, down from £1.2 billion in May. Meanwhile, borrowing by large businesses slowed, with annual growth dipping to 6.7%, while borrowing by SMEs rose into positive territory for the first time since August 2021, at 0.3%.

For now, the housing market appears to be adjusting to a new equilibrium, with moderate price adjustments and more attractive mortgage offers supporting a gradual revival in borrowing and transactions. Whether that recovery gathers pace will depend on broader economic conditions – and the Bank’s next move on rates.