Mortgage approvals rose in January to the highest number since February 2016, as buyers returned to the market following the election result.
The Bank of England’s latest money and credit statistics revealed that mortgage approvals for house purchases, an indicator for future lending, increased to 70,900 in January, a 4.4 per cent increase from December – and the highest number since February 2016.
Furthermore, approvals for remortgages rose by 3.9 per cent to 52,100.
Meanwhile, net mortgage borrowing – which lags approvals – by households was £4bn in January, slightly below the £4.3bn average seen over the past six months, while the annual growth rate for mortgage borrowing remained at 3.4 per cent.
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“The highest rate of mortgage approvals in almost three years and particularly so early in the year is yet further proof, if it were ever needed, that buyers are returning in their droves following December’s election result,” said Marc von Grundherr, director of estate agent Benham and Reeves.
“It is this huge influx of demand that has seen prices increase at such notable rates of late and as a result, the market is now in the best shape it’s been since the EU Referendum itself.
“Not only are we seeing performance exceed expectations but there is a very real chance of an interest rate cut on the horizon, which will further boost buyer sentiment, borrowing, and overall market performance.”
The Bank of England data also showed that the annual growth rate of consumer credit remained at 6.1 per cent in January.
The growth rate has been around this level since May 2019, having fallen steadily from a peak of 10.9 per cent in late 2016.
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These growth rates represent a £1.2bn flow of consumer credit in January, in line with the £1.1bn average seen since July 2018.
Within this, net borrowing on credit cards fell a little to £0.2bn while net borrowing for other loans and advances rose slightly to £1bn.
“It’s promising to see that the level of consumer credit remained steady in January,” said Vikki Jefferies, proposition director at mortgage network PRIMIS.
“That said, it’s important that consumers keep on top of their finances to ensure they don’t overextend themselves with their outgoings.
“This is particularly important for those who borrowed during January to make ends meet, perhaps as they managed the fallout of the Christmas period.
“This is where advisers can step in to help. With the support of a professional, borrowers will be better-informed on how to manage their finances in the long-run and are less likely to fall into a mortgage deal that could leave them financially worse off.
“Advisers are also a big help for clients whose circumstances change during their term, having the resources to be able to offer customers a better deal that aligns with their new financial situation.”
The annual rate of bank lending fell to 0.8 per cent, the weakest since July 2018. The growth rate of borrowing from large businesses and SMEs dropped to 0.9 per cent and 0.5 per cent respectively.