Mortgage approvals hit nine-month high as borrowing costs ease further

Approvals for house purchases rose to a nine-month high in September, as borrowing costs continued to ease and buyers shrugged off concerns about a potential property tax overhaul.

Some 65,940 mortgages for house purchases were approved in September, about 1,000 more than in August.

It comes as the “effective” interest rate, referring to actual interest paid, on new mortgages decreased to 4.19% in September – the lowest level since the beginning of January.

The level of mortgage lending also increased by 3.2% last month – the fastest rate since the start of 2023, according to new data from the Bank of England.

The total amount of mortgage debt borrowed by individuals in September, on net, reached £5.5 billion, the highest since March.

There was a surge of borrowing in March as home buyers rushed to take advantage of stamp duty discounts before a deadline at the beginning of April.

But the latest data points to resilience in the housing market, with buyer activity continuing to grow.

Nevertheless, there were around 600 fewer remortgage approvals during September, the report showed. The figures only capture remortgaging with a different lender.

Furthermore, the total amount of consumer credit borrowed by individuals in September, on net, fell to £1.5 billion from £1.7 billion in August.

Sarah Coles, head of personal finance for Hargreaves Lansdown, said that “six months of falling mortgage rates have played a key role” in approvals rising.

But she added that there were many hopeful buyers who were “playing the waiting game”.

“Potential movers are still worried about what the future holds, as more weakness creeps into the jobs market, and the Budget looms,” she said.

Alice Haine, personal finance analyst for Bestinvest by Evelyn Partners, said there was “growing speculation that Chancellor Rachel Reeves will target property taxes in her autumn Budget on November 26”.

“The housing market has been under pressure following the end of the stamp duty tax break in the spring, which saw thresholds returned to their previous lower levels – increasing purchase costs for buyers.

“With fears mounting that the Chancellor may introduce further property tax reforms, the market is stuttering as buyers and sellers pause moving plans and wait to see what unfolds.”

She pointed to some estate agents reporting a drop in buyer demand and even abandoning sales in some cases.

However, Elliott Jordan-Doak, senior UK economist for Pantheon Macroeconomics, said the latest lending data showed “few signs of pre-Budget worries creeping into activity” as “consumers and businesses appear confident”.

“We still think that the risks to the housing market for the rest of this year lay to the downside, however, as buyers take a wait-and-see approach to the Budget,” he said.

“But the solid mortgage approvals numbers provide further indications that fundamental demand is holding firm despite the pessimism shown in the housing market surveys, so house prices should continue to rise over the next few months, if only slowly.”