Mortgage approvals dip in February as rates begin to rise: BoE

However, approvals remain above the 12-month pre-pandemic average up to February 2020 of 66,700.

Approvals for remortgaging with a different lender rose to 48,200 in February. This remains below the 12-month pre-pandemic average up to February 2020 of 49,500, but is the highest since February 2020 (52,100).

Net borrowing of mortgage debt by individuals decreased to £4.7 billion in February, from £5.9 billion in January, but remains above the pre-pandemic average of £4.3 billion. Gross lending rose to £26.1 billion in February, from £24.0 billion in January. Gross repayments also rose to £21.0 billion in February from £18.5 billion in January.

The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages rose by 1 basis point to 1.59% in February, following the MPC's decision to rase interest rates to 0.5% on the 3rd February. The rate on the outstanding stock of mortgages also ticked up 1 basis point to 2.02%.

Steve Seal, CEO of Bluestone Mortgages, commented: “Although today’s dip in mortgage lending is hardly surprising given the current inflationary pressures, affordability will continue to be an issue. Our own research found that rising costs of everyday items are the main concern for ‘non-vanilla’ customers. Combined with rising energy prices, and the hike to National Insurance contributions, we’re likely to see a growing cohort of customers locked out of the mainstream mortgage market."

Mark Harris, chief executive of mortgage broker SPF Private Clients, commented: "The Bank of England records a dip in lending and approvals for house purchases in February, confirming that the froth has come out of the market. However, the numbers are still above the pre-pandemic average, demonstrating a calmer, more measured, and ultimately more sustainable market.

"There is certainly plenty to keep brokers busy as borrowers increasingly worry about rising mortgage rates and are keen to secure a fixed rate in particular before they rise further. With the effective interest rate on newly drawn mortgages rising by 1 basis point to 1.59 per cent in February, the only way is up for rates although they are still at comparatively low levels from an historic perspective."