Industry reacts to last mortgage approval figures

Mortgage approvals on house purchases for June were 59,976 according to the Bank of England - down marginally (0.3%) from 60,134 in May.

However, they are considerably higher (+11.7%) than the 53,709 seen in June 2023.

The Bank says there is optimism for mortgage approval increases in the coming months, especially if base rate is cut tomorrow - although this may not materialise until the Autumn.

Reacting to the news Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “Mortgage approvals for new purchases held steady, while remortgage approvals dipped although the latter may be down to borrowers sticking with their existing lender rather than going through the longer process of remortgaging to another provider.

“The effective interest rate paid on new mortgages rose again by three basis points to 4.82 per cent in June. This comes as no surprise although we have seen in recent days that lenders have reduced mortgage rates, particularly for new borrowers. Those coming up to remortgage will hope some better rates will be available for those remortgaging going forward, resulting in less of a payment shock. 

“With inflation sticking at its 2% target, an interest rate cut is increasingly likely, with some expecting it to come on Thursday. When it does happen, it will give the market a welcome boost and lenders more confidence to price their mortgage rates lower. It may even result in an uptick in mortgage approvals in coming months, particularly if successive rate reductions are forthcoming."

Jeremy Leaf, north London estate agent and a former RICS residential chairman, states: “Mortgage approvals are always a reliable indicator of future market activity. However, it is inevitable with so much talk of lower base rates over the past few months that buyers will delay moving plans if mortgage costs are likely to be lower in the near future.

“These figures only tell part of the story as they don’t include about 35 per cent of those who are buying and not reliant on finance. Overall, in our offices, we are seeing a steady, not spectacular picture, and if anything summer holidays have arrived early as the market comes to terms with a similar but slightly different post-election mindset."

And the chief executive of Octane Capital, Jonathan Samuels, comments: “Now that the political dust has settled we expect to see the nation’s buyers returning to the fold and this increase in activity should only strengthen as the prospect of an interest rate cut looms ever closer. We’re also seeing lenders act in anticipation of a reduction in the base rate, with the average daily swap rate already starting to decline in recent weeks. This is a leading indicator that the mortgage rates currently on offer could soon start to reduce, if they haven’t done so already.”
 
Simon Gammon, managing partner at Knight Frank Finance, adds: "Repeated false dawns in the battle against inflation have left the property market stuck in first gear, but it's now very likely that we'll have a busier second half of the year. The lenders have cut margins to the bone in the battle for market share, and this pattern should continue as the Bank of England offers some relief in the form of reductions to the base rate. The first Bank of England rate cut, whether it arrives on Thursday or perhaps in September, will provide a big boost to sentiment, which has improved for several months already.”

And Nathan Emerson, chief executive of Propertymark, says: “The General Election did not damage people’s confidence in borrowing money to purchase their next home in the way many may have anticipated. Momentum has sustained itself, however, now we have a newly elected government that is ambitious about building new homes, we hope that confidence increases further in the housing market. In addition, Propertymark is keen to see further confidence boosts with the Bank of England considering a cut in interest rates when they feel this is the right time to do so.”