Market activity expected to accelerate over the rest of the year
Net mortgage borrowing by individuals declined by £0.9 billion to £4.5 billion in July, following a £3.2 billion increase to £5.4 billion in June, according to new data released by the Bank of England.
Meanwhile, approvals for house purchase mortgages, which serve as a forward-looking indicator of borrowing, rose by 800 to 65,400 in July. In contrast, approvals for remortgaging with a new lender dropped by 2,700 to 38,900.
The ‘effective’ interest rate on new mortgages fell for the fifth month in succession, reaching 4.28% in July, down from 4.34% in June. The average rate on existing mortgage balances remained unchanged at 3.88%.
For mortgage brokers, these Bank of England figures point to a mixed outlook. While overall borrowing has decreased, the rise in purchase approvals and lower rates suggest steady demand and new opportunities, particularly as lenders adopt more flexible criteria. Brokers may see increased enquiries from first-time buyers and remortgagors, but ongoing affordability challenges mean expert advice remains essential for clients navigating the evolving market.
“Considering the many twists and turns within the wider economy currently, it’s extremely positive to see a further uplift in mortgage approvals,” said Nathan Emerson (pictured top left), chief executive of industry body Propertymark. “The resilience of the housing market is often a direct indicator of consumer confidence and affordability, and it has been reassuring to see forward momentum as the year has progressed.
“Hopefully, now that the Bank of England has taken the call to cut the base rate by a further quarter percent, we should see lenders bringing additional levels of competition to the marketplace. Those already on fixed-term mortgage products should already be feeling the combined benefit of three base rate cuts across the year.”
“Against expectations, potential homeowners are trading their housing applications for days-away as house prices dipped in August,” commented Steve Griffiths (pictured top centre), commercial director for retail mortgages at Shawbrook. “While one factor could be due to the buyers’ market aided by the recent cut to interest rates, it could also be the impact of ongoing affordability constraints, as potential homeowners may need to extend their plans and save more than initially anticipated.
For Stephanie Daley (pictured top right), director of partnerships at mortgage adviser Alexander Hall, the latest monthly increase in mortgage approvals – the third in a row – provides further evidence that momentum in the market is continuing to build.
“Crucially, approvals have remained above the 60,000 mark since March of last year, which underlines the resilience of buyer demand even against a challenging backdrop,” she said. “A number of recent policy changes are already helping to sustain this momentum.
“The decision to make the Mortgage Guarantee Scheme permanent has given lenders additional confidence to back buyers with smaller deposits, while adjustments to loan-to-income caps have provided more flexibility across the lending landscape. Looking ahead with affordability steadily improving, we expect to see activity continue to gather pace over the remainder of the year.”
Griffiths agreed, saying that the general forecast for the rest of the year is positive, especially as lenders are becoming more flexible with their criteria – a relief for first-time buyers who have suffered in the wake of the removal of stamp duty exemption.
“This could combat the higher-than-expected inflation data in June and July, which may deter further interest rate cuts in H2,” he said. “ For those looking to buy, it’s always best to get in touch with a broker for the best course of action, whether you’re just starting to look or you’re ready to put a deposit down.”
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