Mortgage approvals in the UK have taken a hit, dropping to 59,976 in June from 60,134 the previous month as per data released by the Bank of England. Despite falling short of analysts' expectations, the figures still surpass the 2023 monthly average of 48,000. The report underscores the impact of high interest rates, with the effective interest rate on newly drawn mortgages climbing by three basis points to 4.82 per cent, and the rate on all mortgages rising to 3.65 per cent.
There is optimism that the Bank of England might lower the UK's base interest rate for the first time in four years on Thursday. The current rate stands at 5.25 per cent, a 16-year high, sparking expectations that a rate cut could potentially lead mortgage providers to decrease their rates and boost home purchases. Already, some high street lenders are preemptively reducing their rates in anticipation of rate cuts by the Bank, with Nationwide offering products below 4 per cent for the first time since February.
Rob Wood, chief UK economist at Pantheon Macroeconomics, anticipates an improvement in mortgage approvals in the second half of the year, expected to reach 65,000 as mortgage interest rates decrease. The data also reveals a decrease in lump sum mortgage repayments in June to £1.2 billion, the lowest amount recorded since January 2016, indicating a reduction in consumer concerns about rising interest rates. Additionally, the increase in gross lending to £20.8 billion in June surpassing the £18.7 billion in repayments that month showcases some resilience in the housing market.