More would-be property buyers secured mortgage funding approval in January this year compared to the previous month, according to latest figures revealed by the Bank of England.
A total of 67,478 mortgages were approved while another 49,242 remortgages went through, analysts reported.
The reason for the increase is partly down to the fact those households who have been planning to move at some point in the future are securing mortgages now before an anticipated Bank of England base rate hike before summer. Economists believe an additional 0.25 onto the bank’s base rate wouldn’t be too far off the mark.
Half a million UK mortgages due to expire this year
The news comes at a time when it was revealed that more than half a million mortgages belonging to UK households are due to expire this year. Meanwhile, research by the Telegraph newspaper showed that the average household could save as much as £600 a year by taking advantage of the current low-interest rate and switching their mortgage now.
First-time buyers are already benefitting from Philip Hammond’s pledge to help them – and the housing market in general – during his Autumn Statement. A key move in this respect was to reduce Stamp Duty for first time buyers on homes valued at £300,000 and less. In January this year, the government claimed their plan was working, with first-time buyer numbers up by 16,000 since November.
Those with an existing mortgage have already been forced to accommodate a 0.25 hike in the Bank’s base rate, introduced in November 2017 (the first since 2010 thanks to the financial crash in 2007). That resulted in December 2017 seeing the lowest number of mortgages going through for three years. At the time the number of residential mortgages rubber-stamped decreased from 64,712 in November to 61,039 in December – making it the lowest number of mortgages approved since January 2015 at 63,500.
UK households already ‘feeling the pinch’
Analysts agree that increasing the base rate again will result in households feeling even more financially squeezed. Many have already been ‘penny pinching’ since inflation went up following the UK’s surprise Referendum result to leave the European Union in June 2016.
At the same time, the purse tightening has been compounded by poor wage growth. It means that for many of those planning to move house getting a mortgage at a lower interest rate could be the only way they could afford to in the present circumstances.
Despite this, mortgage interest rates are still at a historically low rate, financial lenders point out – even if the number of mortgage deals isn’t quite as abundant as before with analysts pointing out that the number of mortgage products available on the market had dropped since October last year. At that time potential purchases could choose from a total of 4,815 different deals. Not so today, where the biggest drop has been in the 90 to 95 percent LTV sectors.