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UK mortgage approvals rose for the first time in May this year, denying its forecast and pointing to a recovery in the housing market after the end of the stamp-free holiday.
Net mortgage approvals for home purchases increased from 2,400 to 63,000. This is the first increase since December 2024, the Bank of England said Monday.
The economists voted by Reuters expected approvals to fall to 59,750.
Also, remote gauge approvals increased from 6,200 to 41,500 in May, the largest increase since February 2024.
The data points to improvements in the housing market despite the print mandatory threshold returning to pre-2022 levels on April 1, increasing costs for many property buyers.
For example, first-time buyers have begun paying taxes on assets above £300,000, rather than £425,000 threshold.
Separate official data released in the month showed that UK home prices fell at the fastest monthly pace in almost four years in April.
“The market has bounced back now that the uncertainty of the recent stamp duty deadline has passed,” said Stephanie Daly, partnership director for mortgage advisor Alexander Hall.
As interest rates show greater stability and many lenders continue to offer competitive 4% mortgages, “conditions continue to support both first-time buyers and home movers,” she added.
BOE data also showed that “effective” interest rates (actual interest) on newly withdrawn mortgages have fallen from 4.49% in May, down from 4.49%, to 4.47%, from the lowest since April 2023.
However, the rate of outstanding shares on mortgages has risen slightly, rising to 3.87%, the highest since 2009, highlighting the cumulative impact of interest rate increases since the Bank of England began raising borrowing costs in 2021.
The market is priced at a 72% chance that the BOE will cut by a quarter point from the current 4.25% at its next meeting on August 7th. This marks the fifth reduction in borrowing costs since last summer, as inflation rates fell from a large number of months in October 2022.
Pete Mgreston, managing director of online mortgage advisor, said interest rate cuts could lead to more people buying property.
BOE’s consumer credit data also showed that net borrowing by individuals fell to £859 million in May, down from £19 billion the previous month to the lowest since April 2024.
Ashley Webb, an economist at Consultant Capital Economics, suggests that retail sales from April to May fell sharply by 2.7%, reported earlier that month by the National Bureau of Statistics. He added that this supports his view.
