According to the Bank of England’s Money and Credit data, there was also a jump in mortgage approvals for house purchases, rising by 2,400 month-on-month to 63,000 in May. The central bank said this was also the first increase in purchase approvals since December 2024.
Melanie Spencer, sales and growth lead at Target Group – part of Tech Mahindra – said: “After a few quiet months, it’s good to see approvals rising. That will help lighten the shadow these statistics have been casting over the market’s outlook.
“It’s too soon for optimism, though. Yes, some lenders have started loosening criteria a little. But recently, we have seen inflation, including owner-occupied housing costs, the so-called CPIH, hitting 4%. And the RPI, the Retail Prices Index, which sets the costs of many business contracts and the charges on the index-linked portion of our national debt, has risen to 4.3%.”
Spencer added: “On any rational assessment, inflation is running at double the target rate. That may well lead to some debate at the bank about increasing interest rates or, at the very least, making fewer cuts, later. That will mean limited relief for borrowers in the future.”
Jason Tebb, president of OnTheMarket, said the market appeared to be “back on track” considering the rise in purchase approvals.
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He added: “Market stability and buyer confidence continues to be steady, even though it is now too late to take advantage of the stamp duty holiday.”
Gross lending rises as average rates stay stable
In May, gross mortgage lending totalled £20.4bn, up from £16.9bn in April. Meanwhile, gross repayments fell from £18.2bn to £17.6bn month-on-month.
The Money and Credit report showed there was a recovery in net borrowing of mortgage debt, which increased by £2.8bn in May to a total of £2.1bn. This followed a large decline of £13.8bn to negative £800m the month before.
The annual growth rate for net mortgage lending rose slightly from 2.5% to 2.6%.
Borrowers had an average interest rate of 4.47% on newly drawn mortgages in May, a slight fall from the average of 4.49% in April. However, there was a small rise in the average rate on outstanding mortgages, which went up from 3.86% to 3.87%.
Tebb said: “With the rate on newly drawn mortgages falling again in May, while the rate on outstanding mortgage stock rose slightly, overall there are signs that affordability continues to ease a little.
“Several base rate reductions since last August have helped, along with lenders easing criteria, but mortgage rates are still higher than many have grown used to in recent years.
“Further rate reductions from the Bank of England would provide more impetus for the market in the second half of the year.”
This article was first published on YourMoney.com‘s sister site, Mortgage Solutions. Read: Remortgage activity reaches 15-month high in May – BoE
