Mortgage lending staged a modest recovery in May, according to new data from the Bank of England, as net approvals for house purchases rose for the first time in five months, signalling tentative signs of renewed confidence in the UK housing market.
The latest Money and Credit release shows net mortgage approvals increased by 2,400 to 63,000 in May, the highest level since January and the first monthly uptick since December 2024. Remortgaging activity also strengthened, rising by 6,200 to 41,500 — the sharpest increase since February 2024.
Net borrowing of mortgage debt, which fell sharply in April amid subdued market activity, bounced back to £2.1 billion in May, reversing a £0.8 billion net repayment the previous month. Gross lending climbed from £16.9 billion in April to £20.4 billion in May, while repayments fell slightly to £17.6 billion.
The annual growth rate for net mortgage lending ticked up marginally from 2.5% to 2.6%, while the effective interest rate on newly drawn mortgages edged down to 4.47%, from 4.49% in April. The average rate on outstanding mortgage balances crept up to 3.87%.
“INCREDIBLY POSITIVE”
Nathan Emerson, chief executive of Propertymark, welcomed the increase in mortgage activity as “incredibly positive news,” pointing to it as “one of the loudest signals of them all regarding consumer affordability.”
He also noted a 30% month-on-month increase in property viewings heading into the summer, and referenced the government’s proposed National Housing Bank as a potentially transformative measure that could unlock funding for up to 500,000 new homes.
Commentators struck a cautious tone, however, noting that while approvals are rising, economic headwinds remain.
Melanie Spencer, sales and growth lead at Target Group, said it was “too soon for optimism,” highlighting that inflation remains well above the Bank of England’s 2% target.
“The RPI is running at 4.3% and CPIH at 4%, so on any rational assessment inflation is still double the target rate,” she said. “That may well lead to some debate at the Bank about increasing interest rates or, at the very least, making fewer cuts, later. That will mean limited relief for borrowers in the future.”
Even so, signs of stability in pricing and product choice have contributed to a more upbeat mood among market participants.
Stephanie Daley, director of partnerships at Alexander Hall, said May’s increase in mortgage approvals marked a turning point, adding that the expiry of the recent stamp duty deadline had removed a significant source of uncertainty.
“With interest rates showing greater stability and many lenders continuing to offer a competitive range of sub-4% mortgage products, conditions remain supportive for both first-time buyers and home movers,” she said.
That view was echoed by Jonathan Samuels, chief executive of Octane Capital, who said the rise in approvals was a “clear sign the market is regaining its footing.”
“Stable interest rates and a wider range of more favourable mortgage products are fuelling renewed demand,” he said. “We’re heading into H2 with momentum and the fundamentals suggest we’re set for a stronger second half of the year.”
While some observers remain wary about the threat of inflation and the potential for delayed rate cuts, the May figures offer lenders and borrowers alike a welcome reprieve after a sluggish start to the year.
The Bank’s data also show a softening in consumer credit, with net borrowing falling from £1.9 billion in April to £0.9 billion in May, driven by a sharp fall in credit card borrowing. The annual growth rate in credit card lending fell from 9.9% to 9.2%, while growth in other types of consumer credit held steady at 5.3%.
Overall, however, lending to households and businesses rose significantly, with the flow of sterling net lending (M4Lex) reaching £8.4 billion in May, up from £1.4 billion in April — a sign that, while challenges remain, the banking system is once again extending credit across the economy.
