MARKET NEWS

Mortgage approvals for house purchases in the UK rose in May, as the housing market recovered quickly from the end of a tax break for homebuyers a month earlier.

Net mortgage approvals rose by 2,400 to 63,000 in May, the first monthly increase recorded since December. Approvals for remortgaging with a different lender also increased, climbing by 6,200 to 41,500—the highest monthly rise since February of last year, when approvals grew by 6,600, according to the latest money and credit statistics released by the Bank of England.

Nathan Emerson, chief executive of Propertymark, a professional body for estate agents, said: "It is incredibly positive news to see an increased number of mortgage applications approved. 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.

"As we head into the summer months, we have witnessed on average the number of viewings per property available see an uplift of around 30% compared to the month previous. On top of this, we have also seen the UK government make a pledge to create a National Housing Bank which could bring significant investment to help build 500,000 new homes, enabling a potential greater degree of flexibility for those who aspire to buy."

Mortgage net borrowing increased by £2.8bn in May, bringing the total to £2.1bn. This follows a sharp contraction in April, when net borrowing fell by £13.8bn to minus £0.8bn.

Karim Haji, global and UK head of financial services at KPMG, said: "May’s uptick in mortgage approvals bucks the downward trend we’ve seen throughout the year so far. The gradual easing of interest rates could be helping to boost confidence and demand amongst mortgage borrowers.

"The cost of living remains high, but a drop in consumer borrowing in May signals that rising incomes are starting to feed through to the cost of day-to-day expenses."

The ‘effective’ interest rate on newly drawn mortgages decreased slightly, falling to 4.47% in May from 4.49% in April. However, the average rate on the outstanding stock of mortgages ticked up to 3.87% from 3.86%.

Simon Gammon, managing partner at Knight Frank Finance, said: "Mortgage rates have largely plateaued, with leading fixed deals just below 4%. Lenders are adjusting pricing at the margins – some cuts, the occasional rise – but it’s more about managing business volumes than responding to any major shift in outlook.

"Remortgaging jumped and will continue to rise as the year progresses – 1.8 million fixed rate mortgages are due to mature during 2025. This will be painful for those moving off five-year fixed rate products agreed in 2020, when mortgage rates were still ultra-low."

The figures also showed that consumer credit growth slowed sharply. Net borrowing of consumer credit by individuals declined to £0.9bn in May, more than halving from £1.9bn in April.

Within this category, net borrowing via credit cards dropped significantly to just £0.1bn, down from £1.2 bn in the previous month.

Other forms of consumer credit saw a slight decrease, with net borrowing falling to £0.7bn from £0.8bn.