Lending activity rises as mortgage approvals hold steady, signalling market confidence
Mortgage borrowing in the UK grew by £0.9 billion in January, bringing total net lending to £4.2 billion, according to the latest Bank of England (BoE) Money and Credit report.
The increase follows a £1.1 billion rise in December, continuing an upward trend in lending activity. The annual growth rate for net mortgage lending also climbed to 1.8% in January, up from 1.5% the previous month.
Gross lending remained steady at £21.3 billion, while gross repayments dropped to £16.3 billion from £18.5 billion in December.
Mortgage approvals, a key indicator of future borrowing, edged down by 300 to 66,200 in January, following a small increase in December. However, remortgage approvals — covering borrowers switching to a new lender — rose by 2,200 to 32,900, reversing declines seen in the previous two months.
Commenting on the latest BoE lending figures, Richard Donnell (pictured left), executive director at Zoopla, noted that mortgage approvals for home purchases have risen 19% year-over-year, aligning with broader improvements in housing market activity.
“Mortgage demand is back in line with pre-pandemic levels and supporting increased numbers of new sales being agreed,” he said. “The average mortgage rate for new loans was higher at 4.5%, showing how the housing market has adjusted well to higher mortgage rates over the last two years, with income growth working hard to support affordability. The latest signs are that demand continues to grow, and we expect 5% more home sales than last year with house prices rising 2.5% over 2025.”
Tomer Aboody (pictured centre), director at specialist lender MT Finance, said that the slight monthly decline in approvals reflected continued confidence in the market.
“Interest rates may be higher than many are used to but remain at an affordable level compared to 2023, and further indications of further falls in rates to come are fuelling borrower confidence,” he added. “With the looming changes to stamp duty upon us, there is some apprehension about the next few months and how the market will react to the fallout from Reeves’ October Budget. Many are hoping for further rate cuts and/or increased flexibility from lenders, which would help boost activity.”
Richard Pinch (pictured right), senior director of risk at financial consultancy Broadstone, agreed with both Donnell and Aboody, describing January’s data as a sign of a strong housing market despite the dip in approvals.
“Many buyers are pushing ahead with purchases ahead of the stamp duty increase in April,” he said. “While economic conditions remain challenging, the Bank of England is expected to cut rates faster than previously anticipated, with major lenders already reducing mortgage rates.”
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