Net mortgage approvals for house purchases slightly increased to 66,500 in December, compared to a decrease of 2,300 in November, latest Bank of England data revealed this morning.
Approvals for remortgaging decreased by 700 to 30,500, falling for a second consecutive month.
Meanwhile, net borrowing of mortgage debt by individuals rose by £1.0 billion, to £3.6 billion in December.
The latest figures could prove to be a godsend to borrowers. With the Bank’s rate-setting Monetary Policy Committee meeting next week a rise in mortgage approvals and an increase in net mortgage borrowing should indicate growing confidence in the housing market.
RATE CUTS
The slight increase in approvals for house purchases also suggests that buyers may be anticipating rate cuts in the near future, prompting them to secure loans before demand drives up property prices.
Meanwhile, the decline in remortgaging approvals could indicate that homeowners are holding off in the hope of refinancing at even lower rates if the Bank of England reduces the base rate further.
But as Mortgage Soup reported this morning, The Bank yesterday warned that easing mortgage lending restrictions could lead to higher home repossessions and may not effectively support first-time buyers.
INDUSTRY REACTION
Tony Hall, head of business development at Saffron for Intermediaries, said: “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.”
REGULATION REFORMS
And he added: “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.”
GROWTH AND INNOVATION
Arjan Verbeek, chief executive of Perenna, said: “After a fall in mortgage approvals and net lending in November, it is reassuring to see sign of activity in the property market.
“With the Chancellor’s focus now firmly on enabling growth and innovation, the mortgage industry will be waiting with bated breath to see what regulatory shifts are on the horizon to drive this activity even further.
“If we are going to have any hope of doing that, we have to improve the ability of first time buyers to access the market as well as downsizers who are putting off moving for fear of being hit with a big stamp duty bill they simply can’t afford.”
MORTGAGE SOLUTIONS
He added: “As it stands, the structure and short-termism of the UK mortgage market simple isn’t up to this need. To lead the UK back to a nation of homeowners, it is crucial that lenders are able to develop mortgage solutions, from 0% deposit mortgages to long-term fixed rate solutions that safely meet modern consumer demand.
“The potential review of the LTI cap is a promising step in the right direction: its removal, combined with a review into broader assessment criteria, would be a gigantic leap forwards in improving access to the housing market for all.”
CLIMBING DEMAND
Mark Hollands, head of sales and distribution, Bluestone Mortgages, added: “It’s encouraging to see the mortgage market end 2024 on a high, despite the usual Christmas market slowdown.
“As 2025 gets underway we hope to see demand continue to climb as consumers look to get ahead of the incoming stamp duty changes.”
AFFORDABLE LEVEL
Tomer Aboody, director at MT Finance, said: “The growth in borrowing and approvals in December further indicates the confidence which was felt in the market at the back end of the year.
“Interest rates may be higher than many are used to but remain at an affordable level compared to 2023, and further indications of another drop in rates is fuelling borrower confidence.
“With the October budget implications yet to fully hit, we are hopeful that activity in the market continues to improve as borrowers’ ability to finance remains high.”
STAMP DUTY DEADLINE
Jonathan Samuels, chief executive of Octane Capital, said: “Any predictions of a seasonal slump in mortgage market activity have been dispelled today, with the latest figures from the Bank of England showing that mortgage approvals actually increased in December, despite the distractions of the festive season.
“”This heightened activity was no doubt driven, in part, by buyers keen to make their move ahead of the impending stamp duty deadline this April. However, mortgage market health hasn’t been driven by the prospect of a stamp duty saving alone and, in fact, we saw some 31% more mortgage approvals complete over the course of last year when compared to 2023.
“Whilst mortgage rates haven’t reduced as much as the nation’s buyers may have liked they remain largely undeterred and, with the prospect that they will at least start to fall in 2025, we expect another busy year for the mortgage sector.”
CONFIDENCE BOOST
Stephanie Daley, director of partnerships at Alexander Hall, said: “2024 was a year of very positive growth for the mortgage sector, with the number of approvals seen trending upwards as a result of a stabilising property market, with more of the same expected we throughout 2025.
“Whilst the fast approaching stamp duty deadline will help to cultivate buyer activity levels in the short-term, long-term health is also expected to be driven by the potential easing of loan to income caps which will help improve affordability, as well as the expectation of further base rate reductions.
“This will help boost confidence amongst first-time buyers and next steppers, with further support likely to be provided via the ongoing lender innovations being introduced to the market.”
LENDING TARGETS
Hina Bhudia, partner, Knight Frank Finance, said: “The housing market showed remarkable resilience through 2024 given the repeated knocks to sentiment caused by stubborn inflation.
“Mortgage approvals in December were up more than 30% compared to the same month a year earlier and down just 1% compared December 2019, before the onset of the pandemic.
“Mortgage rates have been largely steady during the early weeks of the year, though a handful of lenders did reprice a little higher during the bond market volatility. That volatility has since eased and we do expect lenders to cut mortgage rates as soon as they are able to do so.
“They have fresh lending targets at the beginning of the year and are eager to build market share. If the Bank of England does opt to cut the base rate as many as five times this year, as Morgan Stanley analysts predicted this week, borrowers shouldn’t be waiting long for a reprieve.”
SPRING JUMP
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “Mortgage approvals for new purchases rose after November’s slip, which bodes well for the spring market.
“Remortgaging numbers dipped slightly again, but this could mean more borrowers stayed with existing mortgage providers instead of switching to a new lender, rather than borrowers moving onto standard variable rates and not refinancing at all.
“The effective interest rate paid on new mortgages decreased again to 4.47% in December as lower pricing at the time is reflected in the official figures.
“With Swap rates continuing to fall and the markets predicting further base-rate reductions this year, it is hoped that this will feed through in the form of lower mortgage rates in coming weeks and months.”
UK ROUND-UP
Newspage also asked brokers for their views too.
Katy Eatenton, Mortgage & Protection Specialistat Lifetime Wealth Management, said: “Demand was unusually strong in December, stoked by the looming stamp duty deadline, so the slight uptick in mortgage approvals is no surprise.
“The phone rang all the way up to Christmas Eve and continued to ring between Christmas and the New Year as people sought mortgages to buy their homes and beat the clock.
“In January, the rate war many were expecting didn’t materialise as markets decided they didn’t like Labour’s Budget one bit.
“Despite slightly higher rates, activity levels in January have been robust all the way up the property ladder as people are always keen to be in their new homes by the spring ready for the summer. Affordability, as ever, remains the key challenge for many prospective borrowers.”
SURPRISINGLY BOUYANT
Iain Swatton, Director at Exemplar Financial Services, said: “Despite concerns over the Budget and signs of a faltering economy, mortgage activity remained surprisingly buoyant in December, with strong enquiry levels continuing into 2025.
“While interest is high, we’ve yet to see this fully translate into business. Rate fluctuations persist and a lender price war has yet to emerge, but demand remains resilient.
First-time buyers – unaffected by past ultra-low mortgage rates – have been a key driver, looking to secure a purchase before stamp duty rates rise. Whether this momentum continues beyond the increase remains to be seen.”
COUNTLESS HEADWINDS
Emma Jones, Managing Director at Whenthebanksaysno.co.uk, said: “December usually sees a drop off in demand as people focus on the festivities and office parties but last month was different.
“The rush to beat the stamp duty deadline was definitely a contributor to higher activity levels. January has been overshadowed by uncertainty in the markets and many lenders repricing up.
“Borrowers will be looking to the Bank of England to deliver rate cuts and potentially send mortgage rates down again. The economy is facing countless headwinds that will strengthen once many of the tax changes announced in the Budget go live.”
TERRIBLE SHAPE
Andrew Montlake, Chief Executive at Coreco, said: “Many brokers reported they had a busy December and that appears to show through in this data.
“There’s no doubt that the stamp duty deadline was driving a number of transactions.
“In January, there were expectations for a buoyant start to the year and for lenders to come out firing but the bond market sell-off injected some serious uncertainty into the market.
“It wasn’t the start to 2025 that many were hoping for and the focus is now turning to the Bank of England’s next Monetary Policy Commitee meeting on 6 February.
“The economy is in terrible shape and businesses and consumers alike need rate cuts to take off some of the pressure.”
NO GUARANTEES
Aaron Strutt, Product and Communications Director at Trinity Financial, said: “Most of the new enquiries we have been speaking to are first-time buyers who are keen to get on the property ladder this year.
“There are also lots of homeowners due to remortgage and they want the most competitively priced rates. Lots of people would like to buy before the stamp duty hike but they realise it is unlikely to happen now.
“Many potential buyers expect mortgage rates to come down at one point and think the Bank of England base rate will reduce. Some of the mortgage lenders have increased their rates recently but they have not gone up by much.”
CHEAPER RATES
He added: “We are expecting rates to get a bit cheaper over the coming months, although there are no guarantees. While there has not been a full-on rate war, First Direct still has a 4.23% two-year fix and a 4.13% five-year fix.
“Lenders are also providing up to six times salary mortgages, often to first-time buyers. There is competition between the banks and building societies to attract borrowers and keep the property market moving.”
TURNING TIDE
Ben Perks, managing director at Orchard Financial Advisers, said: “The tide is turning. It’s really encouraging to see an increase during what is normally a quieter month.
“Stamp duty deadlines will be playing a part in this, but hopefully consumer confidence is returning and will continue to grow throughout 2025.
“December has set us up, but the market is still fragile and stability is needed to ensure growth this year.”
