Mortgage approvals jump in October - Bank of England

Mortgage approvals sparked last month, official data showed on Wednesday, despite borrowing costs continuing to push higher.

According to the Bank of England’s latest Money and Credit report, gross mortgage lending fell to £16.2bn from £18.1bn in September.

However, net mortgage approvals - an indicator of future borrowing - for house purchases jumped to 47,400 from 43,700 a month previously. Consensus had been for a smaller increase, to 45,300.

The figure remains well below the 2015-2019 average, however, of 66,400.

Net approvals for remortgaging also rose, to 23,700 in October from 20,600 a month earlier.

The effective interest rate, the actual interest paid, on newly drawn mortgages rose 24 basis points to 5.25%.

The UK housing market was thrown into turmoil a little over a year ago, after Liz Truss’s widely panned mini budget caused mortgage rates to spike. House prices then started to soften, as affordability became stretched and the wider economy slowed.

However, while demand remains subdued, some banks are now trimming mortgage rates. The BoE has also left interest rates unchanged for two months in a row following 14 successive hikes.

Wednesday’s report also showed that individuals repaid £0.1bn net of mortgage debt in October, in stark contrast to the £1bn repaid in September

Net consumer credit borrowing, meanwhile, fell to £1.3bn in October from £1.4bn, as credit card borrowing eased, by £100m to £0.5bn. Analysts had expected consumer credit borrowing to rise, to £1.5bn.

Borrowing on other forms of credit - such as car finance or personal loans - was unchanged at £0.8bn.

At the same time, households deposited net £4.6bn in banks and building societies, the highest since November 2022. Including National Savings and Investments, total net deposits were £6.8bn, below September’s £7.0bn but well above the average monthly net flow of £1.7bn seen in the previous six months.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Growth in the money supply remained subdued in October, primarily due to the ongoing dormancy of the housing market.

"Net mortgage lending likely will remain close to zero over the coming months, given the relatively modest fall in mortgage rates so far and the meagre pick-up in mortgage approvals in response."