The number of mortgages approved in September reached a level not seen in the two years since the Liz Truss mini-budget.
The latest data from the Bank of England shows last month saw the highest number of mortgage approvals since August 2022, the period just before the market turmoil brought about by Truss’s financial statement.
The recent cut in interest rates appear to have helped fuel greater buyer demand as the central bank enacted the first rate cut in four years, bringing the rate down to 5% in August.
Following the cut, 65,647 mortgages were approved, beating market expectations.
Similarly, remortgaging approvals with a different lender increased by 3,100 to 30,800.
Emily Williams, director of research at Savills, commented: “Monthly mortgage approvals have hit their highest level in two years, providing further evidence that house prices are set to continue growing.
“There is also a clear trend in the data that buyers are increasing the size of their loans. The average mortgage advance has increased by 12% year on year, compared to house price growth of 3.2% over the same period according to Nationwide.”
While the base interest rate stood at 5%, new Bank of England statistics also released yesterday showed people actually paid an average of 4.76% on newly drawn mortgages last month.
“As mortgage rates have eased, buyer confidence has lifted, and many have become more comfortable taking on larger loans. With markets expecting another cut to the base rate in November, we expect this trend to continue, creating more capacity for house price growth as we head into 2025,” Williams added.
The average rate on the outstanding stock of mortgages, however, rose slightly to 3.74%, from 3.72% in the previous month. But this still compares favourably to the period after the infamous mini budget in September 2022, which saw mortgage costs spike, with average rates topping 6% on two- and five-year fixed deals at some points.
Stephanie Daley, director of partnerships at Alexander Hall, commented: “Despite the air of uncertainty caused by the looming Autumn Statement, the UK property market has continued to benefit from a robust level of mortgage market activity, recording a fourth consecutive month of positive growth where approvals are concerned.
“This momentum is only likely to build further once the dust has settled on the Budget, as both buyers and lenders will have a clearer view of where they stand within the market.
“The outlook remains a very positive one for the remainder of the year and we expect that the mortgage sector will continue to act as the catalyst that drives the recovery of the wider market forward as we head towards 2025.”
Simon Gammon, managing partner, Knight Frank Finance, said the marginal uptick in mortgage approvals during September is consistent with consumer confidence surveys showing how nervous people are about today’s Budget.
He said: “I can’t remember a fiscal event with so much speculation in the build-up. All sorts of policies and potential tax rises have been floated in recent months, so it’s unsurprising that people feel hesitant about purchasing a new home.
“That said, provided there are no significant surprises, we do expect a more meaningful recovery to begin immediately after the Budget. Nothing that has been reported, including the changes to stamp duty, will be enough to deter the large numbers of purchasers that have put off moving until the outlook becomes clearer. The biggest driver or drag on property market activity will revert back to mortgage rates and the path of inflation, and on that front, conditions look positive.
“There’s been a fair amount of jostling among lenders, with a few notching up rates last week and Barclays announcing a raft of cuts on Monday. We’ve hit a bit of a plateau – the lenders are nervous about the Budget too – but mortgages should resume their drift down in the weeks following the chancellor’s speech, provided nothing we hear is overtly inflationary. With the tax rises likely to come, that feels unlikely.”