Lending activity rises for first time this year
Mortgage approvals for home purchases rose in May, marking the first increase this year, according to the latest figures from the Bank of England.
Net approvals for house purchases climbed by 2,400 to 63,000, the first monthly rise since December 2024. Approvals for remortgaging — limited to switches between lenders — also increased by 6,200 to 41,500, the largest jump since February this year.
Net mortgage borrowing totalled £2.1 billion in May, following a sharp contraction of £0.8 billion in April. The annual growth rate in mortgage lending edged higher to 2.6%, up from 2.5% the previous month.
Gross lending rose to £20.4 billion from £16.9 billion, while gross repayments fell to £17.6 billion, down from £18.2 billion.
The effective interest rate on newly originated mortgages dipped slightly to 4.47% from 4.49% in April, while the average rate on existing mortgage balances nudged up to 3.87% from 3.86%.
“It is incredibly positive news to see an increased number of mortgage applications approved,” said Nathan Emerson (pictured left), chief executive of Propertymark, welcomed the approval increase, commenting on the Bank of England’s new Money and Credit report.
“It is one of the loudest signals of them all regarding consumer affordability, and it is also a massive vote of confidence from lenders in the longer-term prospects of the economy too.”
Emerson noted that buyer demand has picked up into the summer, with a 30% rise in property viewings month-on-month, and pointed to the government’s recent pledge to create a National Housing Bank as a potential boost to housing supply.
For Stephanie Daley (pictured centre), director of partnerships at Alexander Hall, the data reflected a shift in sentiment.
“The increase in mortgage approvals seen in May marks a welcome turnaround following four consecutive months of marginal decline, suggesting that the market has bounced back now that the uncertainty of the recent stamp duty deadline has passed,” she said.
“With interest rates showing greater stability and many lenders continuing to offer a competitive range of sub-4% mortgage products, conditions remain supportive for both first-time buyers and home movers.”
However, others urged caution. Melanie Spencer (pictured right), sales and growth lead at Target Group, noted that while the pickup in activity is encouraging, inflation remains a concern.
“It’s too soon for optimism,” Spencer stressed. “Yes, some lenders have started loosening criteria a little. But recently, we have seen inflation, including owner-occupied housing costs, the so-called CPIH, hitting 4%.”
She warned that stubborn inflation may cause the Bank of England to delay any interest rate cuts, which could limit future relief for borrowers.
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