Mortgage approvals rise but market remains difficult

The number of net mortgage approvals reaches its highest level since September 2022.

There were 61,300 mortgage approvals for house purchases in March 2024, up from 60,500 in February, according to the latest Money and Credit figures released by the Bank of England .

This is the sixth consecutive month in which the number of approvals has increased.

However, between February and March, net approvals for remortgaging with a different lender dropped from 37,700 to 34,200.

With mortgage approvals for house purchases now at their highest level since September 2022, many will be hopeful that the housing market is showing signs of improvement.

“A rise in mortgage approvals overall is a positive move in the market. It is worth noting that fixed rate mortgage pricing fell at the start of 2024, enticing borrowers to grab a deal,” commented Rachel Springall, Finance Expert at Moneyfactscompare.co.uk.

“The volume of mortgage approvals is at its highest level since the mini-Budget, which just shows the significance mortgage pricing has on the sentiment of borrowers,” she continued.

Rising rates

Despite the increase in approvals, affordability continues to be a major concern for new and existing homeowners as several major lenders have been raising their rates over the past week.

“Since these figures from the Bank of England were captured, mortgage rates have been creeping up and the volatility surrounding future interest rate expectations will keep lenders busy to revisit their pricing,” cautioned Springall.

The average two-year and five-year fixed rate stood at 5.91% and 5.48% respectively on 1 May, compared to 5.80% and 5.39% at the start of April.

These rates are significantly higher than two years ago and before, which means homeowners on fixed deals that are due to end soon are likely to see their monthly payments increase. This will put further strain on many households already having to cope with rising costs elsewhere.

If you are struggling with your mortgage payments, it’s important to speak to your provider as soon as possible and seek professional advice, if necessary.

Challenges for first-time buyers

With mortgage rates remaining at a comparatively high level, the situation for first-time buyers continues to be particularly difficult.

Indeed, “becoming a first-time buyer is possibly the most expensive it has been over at least the last 70 years,” commented Paul Broadhead, Head of Mortgage and Housing Policy at the Building Societies Association (BSA).

A recent report from the BSA highlighted the challenges of getting on the property ladder in today’s market, as well as affording all the costs involved with owning a home. It found that first-time buyers increasingly rely on family members for help with their deposit, as well as needing two above average incomes to be in a position to afford a property.

“Aside from mortgage interest rates, aspiring property owners will know that affordable housing is very much in short supply, so there need to be significant changes to the market to turn this around,” Springall observed.

“Would-be buyers may find they need to wait longer if they can’t build a deposit big enough to afford their first home. Cutting down on non-essential outgoings is wise but buyers also need to be conscious of any hikes to their utility bills or the cost of commuting in the months ahead,” she concluded.