UK Housing Market Gain Momentum with Rising Prices and Mortgage Approvals
The UK housing market is showing strong signs of recovery as both mortgage approvals and house prices make significant gains. October witnessed the highest level of mortgage approvals in over two years, while November saw house prices rebounding at the fastest annual growth rate since 2022.
UK Mortgage Approvals Reach Two-Year Highs in October
Residential mortgage approvals in the UK climbed to 68,300 in October, the highest level since August 2022 according to the Bank of England. This marks an increase of 2,200 approvals and the fifth consecutive monthly rise, reflecting renewed activity in the housing market despite uncertainty in the run up to the Autumn Budget.
Remortgaging approvals with different lenders also climbed for the third straight month, reaching 31,400. This underscores a growing interest among borrowers in exploring alternative lending options as competition among lenders intensifies.
Net mortgage borrowing saw a significant rise, growing by £0.9 billion to £3.4 billion in October, rebounding from a £0.3 billion decline recorded in September. Gross lending also increased, reaching £20.2 billion in October compared to £19.5 billion the previous month, while gross repayments held steady at £17.7 billion.
The average (effective) interest rate on new mortgage lending dropped by 0.15% in October, settling at 4.61%, marking the lowest average rate since May 2023. This decrease coincided with the uptick in lending activity.
House Price Growth Accelerates in November
According to Nationwide’s latest report, UK house prices rose by 1.2% month on month in November taking the average price to £268,144. While annual growth rate rose to 3.7% from 2.4% in October marking the strongest rebound since November 2022. House prices are now just 1% below all-time peak recorded in the summer of 2022.
Robert Gardner, Nationwide’s Chief Economist, noted that this rebound was surprising given the sustained affordability challenges, with high interest rates and house prices remaining elevated relative to average incomes.
The rise in house prices is unlikely to have been influenced by the Autumn Budget’s changes to stamp duty, as most applications occurred before the Budget. Gardner attributes the growth in part to a robust labour market, characterised by low unemployment and strong income growth despite inflationary pressures. He also pointed out that household debt-to-income levels are at their lowest point since the mid-2000s.
Outlook
The rise in mortgage approvals in October and house prices reflect continued confidence in the market as buyers took advantage of lower mortgage rates and inflation falling. In addition, the base rate cut in November to 4.75%, may encourage activity among more cautious borrowers.
Despite these positive trends, challenges persist. Inflation ticked up in October, and lenders remain cautious in their pricing strategies due to volatile swap rates. Affordability remains a critical concern, particularly for first-time buyers, as the gap between house prices and average incomes remains significant.
Both reports have certainly thrown a curveball. The post-budget climate remains uncertain as consumers adjust to the announcements' consequences. Most mortgage applications reflected in these figures were likely submitted when rates were trending downward. With fixed rates now gradually rising and predictions suggesting that the Base Rate will not decrease as quickly as previously expected, coupled with potential inflationary pressures, the future has become increasingly difficult to forecast.
The Importance of Expert Guidance
Given the ever-changing market conditions, seeking the assistance of a mortgage consultant is more important than ever. With their expertise, you can navigate these fluctuations effectively and find the best possible mortgage options tailored to your needs.
Our experienced mortgage consultants are ready to assist you with personalised guidance every step of the way. For an initial consultation, speak with our experts or call us at 01628 564631. We're here to help you navigate your mortgage journey with informed advice and care.
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The information contained within was correct at the time of publication but is subject to change.
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Source: The Intermediary
