Demand for Mortgages Soars as rates war draws in applicants

Latest Bank of England data released in recent days shows net mortgage approvals for house purchases rose from 47,900 in October to 50,100 in November, and net approvals for remortgaging up from 24,000 in October to 27,000 in November.

Meanwhile, net borrowing of consumer credit by individuals amounted to £2.0 billion in November, up from £1.4 billion in the previous month.

The lenders’ rates war appears to be working according to analysts.

Tom Bill, head of UK residential research at Knight Frank, says: “The logic is simple: demand for mortgages has risen in recent weeks as rates have fallen. With inflation under 4.0 per cent and money markets pricing in multiple rate cuts this year, we expect housing market activity to keep rising from a low base, which will put upwards pressure on prices.”

And his colleague Simon Gammon - managing partner, Knight Frank Finance - adds: "The fall in mortgage rates since late July has stabilised the market and underpinned a moderate recovery in purchasing activity. That said, activity is still well below long run averages and likely won't recover fully until mortgage rates fall further and wage growth improves affordability. The good news is mortgage rates are now falling quite quickly. Lenders have new targets at the start of the year and are locked in a battle for market share in a sluggish market.”

Meanwhile Harps Garcha, director at the Brooklyns Financial brokerage, comments: "This data matches what we saw on the ground. We experienced a surge in demand for both purchases and remortgages in November, and this trend continued in December and into the first week of 2024. Lower mortgage rates, falling inflation and the prospect of a cut to the base rate sooner rather than later, are driving demand and boosting confidence among buyers.”

Justin Moy, managing director at EHF Mortgages, agrees: "Enquiries over the past two months have definitely increased, and while some may be a little more speculative and focused on a potential home move for later in 2024, there is a clear improvement in the mood of borrowers. Rates will find a new lower level over the coming months, backed up by a few base rate cuts as the economy allows. There is a real determination from some lenders to have products that appeal to all LTV levels, although lower LTVs will continue to dominate the headlines.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, adds: “Back in November, mortgage approvals rose as the pause in rate hikes gave borrowers hope that rates may have peaked. Fast forward to a new year and we find ourselves in the midst of a mortgage price war. With HSBC launching a five-year fix at 3.94 per cent today, following Halifax’s reductions of up to 0.83 percentage points on Tuesday, the gloves really are off. With 2023 being a disappointing year in terms of amount of business done, lenders are keen to get this year off to a cracking start. It is great news for borrowers who have struggled with affordability over the past few months. Although borrowers remortgaging this year will still see an increase in their payments, the pain will not be as bad as it could have been.”