Mortgage approvals hit three-month high but buyer caution remains

The number of mortgage approvals for house purchase has hit a three-month high, Bank of England data shows.

Figures from the Bank reveal there were 47,383 mortgage approvals for October, the highest level since 49,389 were approved in July 2023.

The figure is also 8% higher on a monthly basis but is down 17% annually.

Frances McDonald, director of research at Savills, said the data suggests some confidence is beginning to return to the mortgage markets as rates have continued to drop and buyers adjust their budgets.

She said: “Next year transactions are forecast to improve to 1,040,000, once we see a more meaningful decrease in mortgage rates, before increasing to 1,160,000 by 2026 as mortgaged buyers begin to take a greater share of the market again.”

Karen Noye, mortgage expert at Quilter, added:  “There are subtle signs suggesting we might be slowly emerging from the worst of the turmoil. However, it's clear that we're not completely out of the woods yet. 

“This uptick, though modest, hints at a resilient segment of buyers gradually adapting to the new normal of higher interest rates and navigating an uncertain economic landscape.

“Despite this, the overall mortgage landscape remains subdued. Gross lending has declined, suggesting that the high-interest environment continues to dampen the enthusiasm for new mortgages. 

“This trend aligns with the cautious optimism in the market - people are still wary, potentially waiting for more favourable house prices and easing mortgage costs. While mortgage rates show signs of stabilising, they remain significantly higher than in previous years.

“What we're witnessing is a delicate balancing act. On one side, there's a persistent demand for housing driven by limited stock and rising rental costs, nudging potential buyers towards purchasing despite the high costs. On the other, the deterrent of expensive mortgages and economic uncertainty is leading many to adopt a wait-and-see approach. This push-and-pull dynamic is likely to keep the market in a state of flux.”