Signs of upturn in housing market as mortgage approvals hit six month high

30 January 2024 , 12:43

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The number of mortgage approvals hit a six-month high in December (Image: PA Archive/PA Images)

Mortgage approvals reached a six-month high with 50,459 applicants given the green light for house purchases in December - the highest total since June 2023 when 53,953 were approved - according to Bank of England figures.

There was also some cheer for first-time buyers as the "effective" interest rate, that's the actual interest paid on newly-drawn mortgages, saw a dip from 5.34% in November to 5.28% in December. That's the first drop witnessed since November 2021.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: "We can celebrate approvals pushing through 50,000, and there are some signs that January has seen another bounce, but we're still a long way from a healthy market. Approvals have to be seen in the context of the fact that, excluding the start of the pandemic, we had been used to approvals of over 60,000 a month for the best part of a decade, and we're still well short of this."

And Thomas Pugh, economist at audit, tax and consulting firm RSM UK, offered a view, stating the increase in mortgage approvals for house purchase "suggests that life may be starting to return to the housing market and that, if house prices haven't quite reached their nadir, they're probably not far off it. Indeed, now that attention has firmly turned to when interest rates will start to fall, mortgage rates have started to drop."

"The effective interest rate on new mortgages in December fell for the first time since November 2021. As a result, the housing market is likely to stabilise, and prices will probably start to rise from quarter two, supported by an increase in real incomes. A gradual rebound in housing transactions will also support an economic recovery later this year."

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Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Households managed their finances cautiously towards the end of 2023, but they likely will be willing to borrow more this year, now that mortgage rates have fallen and the outlook for growth in real disposable income has improved."

Overall households' deposits with banks and building societies, as well as NS&I accounts, grew by £6.0 billion in December. This is more than the average monthly rate of £4.2 billion over the past six months, the Bank's Money and Credit report said.

Charlotte Nixon, a mortgage expert at wealth manager Quilter, said: "Overall, these figures reflect a cautious and conservative approach by individuals in managing their finances during the cost-of-living crisis but some life does seem to be being breathed back into the housing market. The focus does now seem to be on reducing debts, saving more, and being careful about taking on new financial obligations."

Brits borrowed less money in December, with the amount dropping from £2.1 billion to just £1.2 billion. This was mostly because people used their credit cards less, a report says. Richard Lane from StepChange Debt Charity said: "While it's encouraging to see consumer borrowing fall particularly in December when Christmas spending is at its peak the fact remains there are still millions of people struggling to meet the most essential of financial commitments and they are turning to borrowing as a result."

"Our research has found that one in eight people has borrowed to keep up with essential payments in the past 12 months, and, with everyday costs like energy bills and groceries still soaring, we can expect to see more and more people turn to borrowing to make ends meet."

* An AI tool was used to add an extra layer to the editing process for this story. You can report any errors to [email protected]

Lawrence Matheson