Mortgage approvals to home buyers reach highest level since summer 2022

The number of mortgage approvals made to home buyers reached the highest level since the summer of 2022 last month, according to Bank of England figures.

Some 68,300 mortgage approvals for house purchases were recorded in October, marking the highest monthly total since August 2022, when 72,200 mortgages got the green light.

Remortgaging approvals ticked up for the third month in a row, with 31,400 approvals recorded in October. The figures only capture remortgaging with a different lender.

The “effective” interest rate – the actual interest typically paid – on newly drawn mortgages decreased to 4.61% in October, the lowest since May 2023.

Uptick

Simon Gammon, a managing partner at Knight Frank Finance, said: “October was a busier month as buyers and sellers sought to squeeze deals through ahead of the Budget, but sentiment has since taken a turn for the worst.

“Most lenders hiked mortgage rates in the fortnight following the Budget, which will keep a lid on activity for the foreseeable. We expect mortgage rates to remain static through the new year at least, and we won’t see any more meaningful falls until the inflation data shows real improvements.”

The figures were released as data from HM Revenue and Customs (HMRC) showed an estimated 100,410 home sales took place in October, 21% higher than October 2023 and 10% higher than September 2024.

Nick Leeming, chairman of estate agent Jackson-Stops, said: “The recent uptick in property transactions in October can be largely attributed to the aftermath of the general election in July. The Labour party’s decisive victory provided much-needed political stability.”

He added: “Current activity reflects a market where transactions are propelled by necessity. Buyers are moving with purpose, driven by personal circumstances rather than opportunistic investments.

“Across the Jackson-Stops network, we continue to note prolonged transaction times, increasing the risk of chains breaking down. This October spike is likely the last significant burst of activity for 2024.”

Amy Reynolds, head of sales at London-based estate agency Antony Roberts, said: “In areas where stock is limited, markets have remained steady, particularly the family home market with work-from-home potential. Homes that are well priced and well presented are still selling relatively quickly; while buyers may pause to assess financial implications, high-demand areas are likely to retain interest.”

Pre-Christmas rush

Malcolm Webb, risk director, Legal & General Surveying Services, said: “It’s encouraging to see borrower confidence continue to grow, with healthy gains in new listings and agreed sales.”

Iain McKenzie, chief executive of the Guild of Property Professionals, said: “One motivating factor could be the tradition of buyers wanting to get moved in before Christmas. We usually witness a rush to complete at this time of the year, as people enjoy the idea of getting their new home ready in time to get their Christmas tree up.”

Richard Lane, chief client officer at charity StepChange, said: “It’s important to note that with rates still high compared to a few years ago, many homeowners are struggling to keep on top of mortgage costs and cover all other financial commitments. What’s more, with inflation above the 2% target, there’s no guarantee rates will continue to fall as quickly.

“We’ve seen the amount of mortgage arrears creep up among our own clients this year and it’s a real concern that there could be many more people out there just on the edge of falling behind with payments. For anyone struggling with ongoing mortgage payments or worried about debt – don’t hesitate to reach out to your creditors and ask for help.

“Mortgage lenders have a regulatory responsibility to support borrowers who’re struggling and may be able to provide forbearance.”

The Bank of England’s Money and Credit report also showed that net consumer credit borrowing by households totalled £1.1 billion in October, slightly down from £1.2 billion in the previous month.

Consumer credit includes borrowing using methods such as credit cards, personal loans and overdrafts.

Within this, net borrowing through forms of consumer credit including car dealership finance and personal loans fell between September and October, while net borrowing through credit cards increased, offsetting some of the decrease.

The annual growth rate for all consumer credit slowed slightly to 7.3% in October, from 7.5% in September.

Over the same period, the annual growth rate for credit card borrowing remained stable at 9.5%.

‘Underwhelming’ growth

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the online investment platform, said: “Net consumer borrowing decreased slightly in October compared to the previous month, indicating that people felt uncomfortable taking on extra credit to fund big-ticket items amid the uncertainty denting confidence in the run-up to the Budget.”

The Bank’s figures also showed that households’ deposits with banks and building societies rose by £20.2 billion in October – the biggest increase since December 2020 (£21.7 billion).

Ms Haine added: “Saving rates on regular bank and building society accounts are continuing to retreat from the highs seen last year.”

Thomas Pugh, economist at audit, tax and consulting firm RSM UK, said: “Overall, the jump in mortgage approvals suggests strong momentum in the housing market, but the drop in consumer borrowing, and large increase in saving raises the risk that consumer spending remains subdued in (the fourth quarter), and economic growth underwhelms again.”

The Bank’s report also said that in October, UK non-financial businesses withdrew £6.3 billion from banks and building societies in all currencies, following net deposits of £1.5 billion in September.