The housing market continued its recovery in August with mortgage approvals rising to their highest level in two years.
Latest data from the Bank of England earlier this week showed UK net mortgage approvals increased to 64,900 in August up from 62,500 in July and the highest level in two years – as August’s interest rate cut attracted more buyers to the market.
It was the third consecutive month mortgage approvals increased and took them to the highest level since August 2022, when 72,000 mortgages were approved.
While rates remained steady at 5% in September the Bank’s monetary policy committee meets next on November 7 and we could yet see some Christmas cheer with another slight reduction in interest rates.
Of course, there’s still October to get through yet and a whole myriad of economic factors that could sway the Banks’ nine strong committee one way or another.
Even so, the current approval number demonstrates a robust level activity. August’s small reduction of 0.25% in Base Rate will have helped to steady the ship and we’re now seeing a wider range of products available to homebuyers providing greater choice and flexibility.
Indeed, major high street lenders such as Santander, Nationwide, NatWest and Barclays are scrambling to offer some of the most competitive deals seen for a while.
For those that can meet its criteria Nationwide has a 5-year fix at 3.74% and 2-year fixes from 3.89%. And the building society has also increased its Helping Hand for first-time buyers product, now lending up to six times income up to 95% LTV, probably as a response to other lenders offering 5.5 times income.
Elsewhere, NatWest is offering further reductions, with 2-year fixes starting at just above 4%.
Jonathan Samuels, Chief Executive of specialist lender Octane Capital, says: “August’s base rate reduction, however, it remains very early days and what we have seen is a significant cut to rates across all lending segments when compared to this time last year.”
And he adds: “This increased level of borrowing affordability has come as a result of increased market stability following the Bank of England’s original decision to hold rates at 5.25% in September of last year and, with market conditions continuing to improve, it’s only a matter of time before we see further rate reductions.”
The surge in mortgage approval numbers came on the back of news that house prices climbed 3.2% year-on-year in September with prices in Northern Ireland climbing 8.6% in Q3.
The latest Nationwide House Price Index revealed this week that house prices rose at their fastest pace since November 2022 with average prices now around 2% below the all-time highs recorded in summer 2022.
Robert Gardner, Nationwide's Chief Economist, says: “Income growth has continued to outstrip house price growth in recent months while borrowing costs have edged lower amid expectations that the Bank of England will continue to lower interest rates in the coming quarters.
“These trends have helped to improve affordability for prospective buyers and underpinned a modest increase in activity and house prices, though both remain subdued by historic standards.”
While Northern Ireland remained the best performer Scotland also saw a noticeable acceleration in annual growth to 4.3% (from 1.4% in Q2), while Wales saw a more modest 2.5% year-on-year rise (from 1.4% the previous quarter).
Gardner adds: “Across England overall, prices were up 1.9% compared with Q3 2023. Northern England (comprising North, North West, Yorkshire & The Humber, East Midlands and West Midlands), continued to outperform southern England, with prices up 3.1% year-on-year. The North West was the best performing English region, with prices up 5.0% year-on-year.
“Southern England (South West, Outer South East, Outer Metropolitan, London and East Anglia) saw a 1.3% year-on-year rise. London remained the best performing southern region with annual price growth of 2.0%. East Anglia was the only UK region to record an annual price fall, with prices down 0.8% year-on-year.”
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