Mortgage approvals defy market uncertainty with April bounce: BoE

Residential mortgage approvals increased to 65,900 in April, from 64,000 in March, according to the latest figures from the Bank of England, showing that borrowers pressed ahead with house purchases despite geopolitical turmoil.

Approvals for remortgaging with a different lender also held steady, broadly unchanged when compared to March.

Despite approvals holding up, net mortgage borrowing dipped in April following a strong Q1. Borrowing decreased to £4.4 billion in April, from £6.8 billion in March, below the previous six-month average of £5.1 billion.

Gross lending also decreased slightly to £27.5 billion in April, from £28.7 billion in March, but still slightly above the six-month average of £24.8 billion. Repayments increased in April to £22.7 billion, from £19.8 billion in March, above the six-month average of £19.7 billion.

The data shows that the average interest rate paid on newly drawn mortgages increased from 4.03% in March to 4.08% in April, as economic volatility began to feed through to mortgage rates.

Richard Pike, chief sales and marketing officer at Phoebus Software, commented: “After a strong Q1, which saw demand rise to a one-year high in March, it’s no surprise that mortgage borrowing dropped back in April as the impact of the Iran crisis sent mortgage rates higher, affecting affordability.

“However, despite the monthly fall in net borrowing, mortgage approvals were up, demonstrating the resilience of the housing market. 

“While the recent volatility has no doubt affected buyer confidence, there are signs that affordability pressures are beginning to ease as economic conditions improve. With Governor Andrew Bailey also indicating the Bank of England could allow inflation to remain above target to support the economy, the indicators are that rates are beginning to stabilise. This should hopefully see market activity pick up again over the coming months.”

Jason Tebb, president of OnTheMarket, said: “Approvals for house purchases - an indicator of future borrowing - rose again in April as buyers and sellers pressed ahead with their plans.

"Of course, these figures reflect decisions made in the earlier stages of the conflict in the Middle East when buyers may have been keen to take advantage of competitive mortgage rates they had managed to secure. It also demonstrates the ongoing resilience of the housing market and the recent holds in base rate from the Bank of England should further help reinforce this sense of stability.

"Our own property sentiment index suggests that buyers and sellers continue to adapt to market conditions. Even against a backdrop of ongoing political and economic turbulence, attitudes towards affordability, property values and moving home remain remarkably consistent.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, added: “Mortgage approvals picked up in April, demonstrating an underlying resilience to the housing market which started to make itself apparent once the Budget was in the rear-view mirror and continued even as rates started to rise as a result of the Middle East conflict.

“The effective interest rate paid on new mortgages increased to 4.08 per cent while the rate on the outstanding stock of mortgages fell to 3.92 per cent. Affordability concerns remain but more than a dozen lenders cut their mortgage rates last week, which will assist borrowers, and it is hoped that the Bank of England will continue to hold base rate steady at least for now.

“Remortgaging numbers were broadly unchanged, suggesting that borrowers may be opting for the ease of sticking with their existing lender when coming to the end of their current deal, rather than shopping around for a new one with a different lender.”