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Highlights:
- Mortgage Approvals Reach High: October saw 68,300 mortgage approvals, the highest since August 2022.
- Interest Rates Decline: The effective interest rate on new mortgages fell to 4.61%, the lowest since May 2023.
- Net Borrowing Increases: Mortgage net borrowing rose by £0.9 billion to £3.4 billion in October.
Mortgage approvals in the UK climbed to their highest level in over a year last month, driven by a drop in borrowing costs, according to the Bank of England. A total of 68,300 mortgages were approved for house purchases in October, up by 2,200 compared to the previous month. This marks the highest monthly figure since August 2022, signaling increased buyer activity in the housing market.
Decline in Borrowing Costs Fuels Activity
The effective interest rate on newly drawn mortgages dropped by 15 basis points to 4.61%, its lowest point since May 2023. This decline has contributed to increased affordability for prospective buyers, encouraging higher mortgage approvals and net borrowing for house purchases.
Net borrowing for mortgages rose by £0.9 billion in October, reaching £3.4 billion. The surge in approvals and borrowing indicates a growing willingness among buyers to re-enter the housing market following a period of higher interest rates.
Consumer Credit and Broader Market Trends
While mortgage activity increased, overall consumer credit borrowing across the UK slipped slightly from £1.2 billion to £1.1 billion. This reflects a cautious approach among consumers toward additional debt amidst ongoing economic uncertainty.
Alice Haine, an analyst at Bestinvest, noted that both buyers and sellers are closely monitoring the trajectory of interest rates. Two recent quarter-point rate cuts have brought some relief to borrowing costs. However, she highlighted concerns that the chancellor’s fiscal policies—encompassing spending, borrowing, and tax measures—could exert inflationary pressure, potentially slowing the pace of further rate cuts.
Looking Ahead: Market Optimism with Caution
The housing market's performance in October underscores its resilience despite broader economic challenges. The reduced borrowing costs and increase in mortgage approvals signal renewed confidence among buyers. However, the outlook remains cautious as policymakers balance inflationary risks with monetary easing.
As market participants await potential further rate adjustments, the UK housing market's trajectory will hinge on economic stability and the pace of fiscal and monetary policy changes. For now, the rise in approvals offers a positive indication of buyer engagement and housing market activity.
