Mortgage rates have increased for the first time in six months, fresh data released yesterday by the Bank of England revealed.
Mortgage approvals for residential property purchases increased by 2,400 to 63,000 in May, while approvals for remortgaging also increased in May, by 6,200 to 41,500.
This was the first rise since last year and the largest hike since February 2024.
In addition, the data revealed that net borrowing of mortgage debt by individuals increased by £2.8bn to £2.1bn in May.
Meanwhile, the annual growth rate for net mortgage lending increased slightly from 2.5% to 2.6% in May.
“This is good news for the housing market and gives us confidence that the reduction in housing market activity following the end of the stamp duty holiday was a blip not a trend,” said Anthony Codling, head of European housing and building materials for investment bank RBC Capital Markets.
“Housing market activity is broadly in line with the five-year average, comforting news for homebuyers and sellers,” Codling added. “However, the government will need to see a more active housing market if it is to get close to its five-year target of 1.5 million new homes.”
“The question now is ‘when’, not ‘if’ we will see the government stimulating housing demand and helping first-time buyers on to the housing ladder, he added.
Andrew Montlake, CEO at Coreco, welcomed the latest mortgage data. He commented: “There’s a flicker of life in the housing market’s pulse, with today’s Bank of England figures confirming the first rise in mortgage approvals for house purchases since last year.
“An uptick of 2,400 to 63,000 may not sound seismic, but in a market that’s been starved of good news, it’s a welcome breath of air.
“A lot of activity this year to date has been skewed by the stamp duty deadline in April, but that is now in the rear-view mirror and this points to growing confidence among borrowers and a realisation that the new norm is here to stay, at least for now.”Demand for mortgages is still there, even though rates appear to have stabilised for now. We’ve seen a lot of lender innovation around affordability in recent months and that may be starting to feed through into this data.
“It’s a market delicately balanced on sentiment and affordability but if lenders continue to price competitively and inflation holds its ground, we may just see these green shoots become more sustainable.”
Simon Gammon, managing partner, Knight Frank Finance, also added: “May mortgage approvals for house purchases ticked up a little but are broadly consistent with a property market treading water. Rates have largely plateaued, with leading fixed deals just below 4%. Lenders are adjusting pricing at the margins – some cuts, the occasional rise – but it’s more about managing business volumes than responding to any major shift in outlook.
“Remortgaging jumped and will continue to rise as the year progresses – 1.8 million fixed rate mortgages are due to mature during 2025. This will be painful for those moving off five-year fixed rate products agreed in 2020, when mortgage rates were still ultra-low.
“The housing market remains driven by first-time buyers and families who really need to move, rather than discretionary buyers in higher price brackets. Downsizers are active too, though many are struggling to offload larger homes in favour of smaller ones, where activity is stronger. The outlook for mortgage rates is benign, and recent labour market data points to a weakening economy that could unlock further base rate cuts – perhaps to 3.75% by the year end. Still, with leading fixed rates unlikely to dip below 3.7% before 2026, current sluggish conditions look set to persist.”
