Mortgage borrowing and approvals fall in January: BoE

Net residential mortgage approvals decreased to 60,000 in January, from 61,000 in December, the latest Money and Credit statistics from the Bank of England show.

Approvals for remortgaging with a different lender also decreased to 38,100 in January, from 38,400 in December.

Net mortgage borrowing fell to £4.1 billion in January, from £4.5 billion in December, below the previous six-month average of £4.5 billion. The annual growth rate for net mortgage lending also decreased slightly to 3.3% in January from 3.4% in December.

Secured gross lending rose to £23.4 billion in January, up from £23.0 billion in December, but still slightly below the six-month average of £23.8 billion. 

The average interest rate paid on newly drawn mortgages decreased, to 4.09% in January from 4.15% in December. The rate on the outstanding stock of mortgages was 3.90% in January, down from 3.92% in December.

Mark Harris, chief executive of mortgage broker SPF Private Clients, commented: “Although mortgage approvals dipped again in January, there is an underlying resilience to the housing market which is starting to make itself felt now that the Budget is out of the way.

“The effective interest rate paid on new mortgages fell to 4.09% and the rate on the outstanding stock of mortgages also fell to 3.9%, suggesting that affordability is continuing to ease.

“As we move towards spring, the good news for borrowers is that lenders are keen to lend and have the funds available to do so. Many of the big lenders have reduced their mortgage rates and while some have increased pricing, we expect rates to jump around, rather than significantly move one way or another.

“Remortgaging numbers slipped slightly, 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.”

Jason Tebb, president of OnTheMarket, said: “Approvals for house purchases - an indicator of future borrowing - dipped again in January following December’s decline as the inactivity and uncertainty in the run-up to the Budget continued to make itself felt. Post-Budget clarity has since helped steady confidence and given buyers and sellers encouragement to press ahead with their plans.

"Last year’s rate reductions had a positive impact on activity, and further cuts this year should boost activity and transactions. The rate on newly-drawn mortgages continues to fall, which will help ease affordability challenges."

Simon Gammon, managing partner at Knight Frank Finance, added: “Mortgage approvals fell in January, reflecting the economic uncertainty that lingered after the November Budget and weighed on borrower confidence. However, leading indicators published over the past month, including asking prices, suggest activity recovered into February as borrowing costs eased.

"The outlook for activity and rates appeared relatively benign only last week, but conflict in the Middle East has introduced fresh uncertainty. Any spike in oil prices could fuel global inflation or, at the very least, prompt central banks, including the Bank of England, to delay further rate cuts until the outlook becomes clearer.”