Most activity down to remortgagers not buyers

Remortgagers, not buyers, are fuelling the increase in mortgage industry activity.

That’s the view of Octane Capital following an analysis of Bank of England mortgage approvals data.

The research shows that overall mortgage approvals between October and December rose at an average rate of 7.7 per cent per month.

However in the remortgage space there’s been a surge of 14.7 per cent per month, compared to a modest rise of 4.6 per cent for home purchase. Other lending, including second charges, increased by 7.7 per cent each month.

While approvals have risen across the board, they still have plenty of room for recovery after falling by 19.6 per cent in August 2023, followed by a further reduction of 8.2 per cent in September.

Approvals are also well down compared to early 2022, when they regularly topped 130,000 per month. To put that into context, in September 2023 there were just over 70,000.

The markets grew more optimistic after the UK’s inflation rate fell to 3.9 per cent in November, lower than was forecast - and closer to the Bank of England’s 2.0 per cent target.

This led some economists to argue that the Bank was more likely to lower the base rate in 2024 than raise it.

As a result, towards the end of 2023 swap rates dropped, which provided lenders with cheaper funding and therefore enabled them to drop their mortgage rates.

The inflation rate unexpectedly inched back up to 4.0 per cent in December - so it’s unclear how much of a push there’s going to be for cheaper mortgage rates in the near future.