In February 2024, the UK witnessed a significant upturn in the mortgage market with mortgage approvals for home purchases reaching their highest level since the aftermath of the mini-Budget introduced by former Prime Minister Liz Truss in September 2022. According to the Bank of England, a total of 60,383 mortgages were approved in this period, indicating a rejuvenation in housing market activity.

This resurgence follows a period of decline instigated by the mini-Budget, which subsequently led to 14 consecutive interest rate rises, dampening mortgage market activities. However, the introduction of a “mortgage price war” at the beginning of the year catalyzed a reduction in average interest rates on new loans, sparking renewed interest among buyers.

Despite the optimism, economists caution that the rebound might not be sustainable in the immediate term. They anticipate a surge in new mortgage activity aligning with predicted interest rate cuts by the Bank of England, expected to commence in June.

Moreover, the competitive environment earlier in the year led to banks and building societies slashing mortgage rates. This contributed to a decrease in the effective interest rate on newly drawn mortgages, despite a continued rise in the average interest rate on the overall stock of mortgages, now standing at 3.49%.

Accompanying this housing market trend, the recent report from the Nationwide Building Society noted a modest 0.2% decrease in the average UK house price for March. Financial analysts highlight that, while mortgage approvals are on the upswing, they still remain below pre-pandemic levels. The challenges of affordability continue to loom over mortgaged buyers, in view of fluctuating mortgage rates and financial stability.

Parallelly, the Bank of England’s data revealed a slowdown in consumer credit’s annual growth rate, pointing towards persisting economic uncertainties among businesses and households alike. Financial experts emphasize the importance of prudent financial management during these times, alerting towards the potential exacerbation of debt problems for certain households amidst rising borrowing rates.