Mortgage approvals for house purchase jump to two-year high in August

The number of mortgage approvals made to home buyers jumped to a two-year high in August, according to Bank of England figures.

Some 64,900 loans for house purchase got the green light, up from 62,500 in July.

It marked the highest level in two years, the Bank of England’s Money and Credit report said.

Approvals for remortgaging (which only capture remortgaging with a different lender) edged up from 25,200 in July to 27,200 in August, after five months in a row of decreases.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Mortgage approvals for new purchases rose again, which bodes well for housing market activity in the final quarter.

“Remortgage approvals also picked up after a dip in July, suggesting a growing number of borrowers are drawn to ‘best buy’ rates offered by other lenders, rather than sticking with their existing provider.”

Looking at non-mortgage lending, net consumer credit borrowing increased slightly to £1.3 billion in August, from £1.2 billion in July.

This was driven by higher net borrowing through forms of consumer credit such as car dealership finance and personal loans, the report said.

Karim Haji, global and UK head of financial services at KPMG, said: “A rise in consumer borrowing in August could signal that many stretched households are still battling the cost of living by turning to credit to get by.”

The annual growth rate for all consumer credit, which includes credit cards, overdrafts and other loans, was 7.6% in August, slowing from 7.8% in July.

During August, households deposited an additional £7.3 billion with banks and building societies, up from £5.9 billion in July.

The annual growth rate of borrowing by big businesses rose from 1.7% in July to 2.9% in August, while the annual growth rate of borrowing by SMEs was “little changed” at minus 4.0%, the report said.

The figures were released as Nationwide Building Society reported that September marked the fastest annual house price growth in around two years.

Nationwide said the annual price growth rate accelerated from 2.4% in August to 3.2% in September, the fastest pace since November 2022 when there was a 4.4% rise.

The average UK house price in September was put at £266,094.

Tom Bill, head of UK residential research at estate agent Knight Frank said: “Falling mortgage rates led to an increase in house price growth in September, with demand also boosted by buyers putting off decisions until after the election.”

Alice Haine, a personal finance analyst at Bestinvest by Evelyn Partners, the online investment platform, said: “Improving mortgage rates and strong income growth have eased the affordability challenge for some buyers in recent months, with the Bank of England’s interest rate cut at the start of August and prospect of at least one more rate reduction to come this year energising the residential property market.”

She added: “Borrowing costs remain relatively high when compared to two years ago and who gains and who loses out depends on the type of mortgage someone has and what stage of the home ownership journey they have reached.

“While first-time buyers and existing homeowners on tracker products may by buoyed by the prospect of better rates this year, homeowners locked into expensive fixed-rate deals with some time left to run won’t feel any respite until their product expires.”

A survey for online budgeting tool IE Hub, released on Monday, indicated that nearly a third of mortgage holders (31%) are still worried about interest rates rising, despite the Bank of England base rate recently being cut from 5.25% to 5%.

A fifth (20%) of homeowners surveyed said their mortgage is significantly more than it used to be.

Nearly a quarter (24%) said they will move mortgages when their current deal ends to try and reduce the costs and 16% have been looking into ways of managing paying their new rates.

Dylan Jones, chief executive of IE Hub, said: “If you do find yourself struggling to pay your mortgage, get in touch with your provider in the first instance and discuss with them a payment plan that you can afford…

“Don’t suffer and worry in silence, reach out – mortgage lenders are there to help you and have a duty of care to do so too.”

Some 1,000 mortgage holders across the UK were surveyed in September for IE Hub.