Approvals set to rise if mortgage market sticks to historic pattern

A new analysis of the housing market suggests approvals will rise following the first Bank of England base rate cut of 2024.

Lender Octane Capital has looked at data going back to 2008 showing mortgage approvals typically climbing in the three months following a base rate cut.

The analysis shows that during the pandemic, the rate cuts in March and April 2020, came at a time when mortgage approvals were plummeting as the housing market was shut down because of Covid restrictions. But from June approvals began to rise steadily month-on-month as the housing market reopened.

Octane also points to the Bank of England’s rate cut in February 2008, which saw mortgage approval levels climb by an average of 2.62% over the three months afterwards.

In September 2023, following a period of post-pandemic base rate increases which began in 2021, the Bank of England held rates at 5.25% - not a cut, but a respite from near-constant increases over many months. Octane says in the months that followed, monthly mortgage approvals climbed to around 60,000 and have remained close to this level since.

Chief executive Jonathan Samuels says: “It stands to reason that a reduction in interest rates will help cultivate a greater degree of mortgage market activity and the uplift felt as a result of last month’s rate cut could be even more substantial than historic trends suggest.

“Home buyers have had to endure one of the most sustained periods of affordability pressure in modern times and this has caused a great deal of pent up demand to build across the property market.

“There’s no doubt that a hold on interest rates has helped to steady this ship, but now that the base rate is starting to reduce, we expect this pressure to uncoil at pace which should drive further house price growth over the remainder of the year.”