Mortgage approvals increased last month, although the number was below the recent average, new Bank of England statistics reveals.

And the figures largely reflect the lending market before war in the Middle East began, so may not be an accurate picture of the current situation.

Loans increase

Loans for house purchases increased to 62,600 in February, from 60,200 in January, below an average of around 63,500 during the previous six months.

Meanwhile, approvals for remortgaging increased to 41,200 from 38,500 in the previous month.

Net borrowing rose to £4.8billion from £4.2billion, above the previous six-month average of £4.5billion.

The ‘effective’ interest rate on newly drawn mortgages went up slightly to 4.10% from 4.09%, the Bank said.

And the rate on the outstanding stock of mortgages was 3.95%, up from 3.9%.

Industry reaction

Nathan Emerson, CEO of Propertymark, says: “With today’s figures reflecting February’s activity, it’s encouraging to see sustained momentum across the mortgage market during this period. This suggests that improving affordability and greater lender confidence were beginning to translate into real buyer activity.

“However, the outlook is far from certain. Escalating geopolitical tensions are likely to feed through into inflationary pressures and base rate expectations, which could quickly dampen borrowing conditions and slow approval volumes in the months ahead.”

“As a result, both buyers and sellers are navigating a more complex landscape, where financial due diligence and timing are becoming increasingly critical to decision-making.

“Nonetheless, the housing market remains a cornerstone of the UK economy, and a return to greater stability and confidence will be key to maintaining transactional momentum as the year progresses.”

Jason Tebb, President of OnTheMarket, says: “Approvals for house purchases – an indicator of future borrowing – increased in February as buyers and sellers put the inactivity and uncertainty created by the run-up to the Budget behind them and pressed ahead with their plans.

Of course, these figures reflect activity before the outbreak of conflict in the Middle East and demonstrate the ongoing resilience of the housing market.

“Last year’s rate reductions had a positive impact on activity, helping ease affordability, although expectations of further reductions have now been put on hold amid concerns of rising inflation,” he says.

Nevertheless, our own property sentiment index indicates an impressive level of resilience and optimism among buyers and sellers. Even against a backdrop of ongoing political and economic turbulence, attitudes towards affordability, property values and moving home remain remarkably buoyant.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “Mortgage approvals are always a reliable indicator of housing market activity over the next few months and are particularly interesting this time around as they show a reversal of the downwards trend for approvals over the past few months.

“Prospective purchasers were clearly happy to continue their interest in buying property with activity improving gradually. However, as recent events in the Middle East have continued so we have seen in our offices the inevitable impact on confidence, particularly regarding mortgage costs and inflation,” he says.

“Needs-driven buyers are still active, but overall numbers have dipped. So far the overwhelming majority of sales are proceeding although nagging concerns about how far and how fast costs are likely to rise in the short term at least are continuing.”

Some encouragement from the government would be timely.”

Tomer Aboody, Director at MT Finance, says: “Surprisingly, net mortgage approvals picked up in February as buyers and sellers put the Chancellor’s Budget behind them, along with the government’s continuing lack of support for the housing market.

“Subsequent developments, including the Middle East conflict and expectations that interest rate reductions are now off the table, won’t help buyer and seller activity and confidence.

“Some encouragement from the government would be timely, perhaps in the form of reducing or reforming stamp duty, which would encourage more people to transact.”

Mark Harris, CEO at SPF Private Clients, says: “Mortgage approvals picked up in February, demonstrating an underlying resilience to the housing market which really started to make itself apparent once the Budget was in the rear-view mirror.

“The effective interest rate paid on new mortgages increased slightly to 4.10 per cent and the rate on the outstanding stock of mortgages also increased to 3.95 per cent. Affordability concerns remain and we expect to see a sharp jump in these average rates in March’s report,” he says.

“Remortgaging numbers increased, suggesting that borrowers coming off low rates are mostly still shopping around for the best rate possible rather than opting for the ease of sticking with their existing lender. We expect this to increase in coming days and weeks as the pricing of new fixed-rate mortgages continues to rise.”

Simon Gammon, Managing Partner at Knight Frank Finance, says: “Mortgage lending remained relatively resilient through February, although the data predates the escalation in the Middle East.

“Since then, borrowing costs have risen sharply, which will begin to weigh on activity in the months ahead. The cheapest fixed rates are now around 4.5%, up from roughly 3.5% in February, with further repricing still underway.

“It is increasingly plausible that leading fixed rates settle closer to 5% in the near term, representing a significant squeeze on borrowers,” he says.

“While much of the upward pressure reflects the energy shock linked to the conflict, there is also a clear behavioural response, with borrowers rushing to lock in deals before rates move higher.

“This risks overwhelming lenders and prompting further re-pricing, reinforcing a feedback loop in which urgency on the demand side adds to upward pressure on rates.”

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