UK mortgage approvals for house purchases have shown a welcome rise in May, offering fresh hope to both buyers and sellers that confidence is returning to the property market. This uptick comes not long after the end of a temporary tax break which many had feared would slow things down further.
According to the Bank of England’s latest money and credit figures, the number of net mortgage approvals rose by 2,400 to reach 63,000 in May. While still below the levels seen a few years ago, this is the first time since December that monthly approvals have increased, suggesting that demand may be picking up again.
Alongside this, there has also been a healthy rise in remortgaging activity. Approvals for remortgaging with a different lender went up by 6,200 to reach 41,500, marking the strongest monthly increase seen since February of the previous year.
Industry experts have responded positively to these figures. Nathan Emerson, chief executive of Propertymark, said that the rise in mortgage approvals is a “welcome sign” of both improved affordability for buyers and renewed confidence among lenders in the stability of the UK economy.
Emerson also noted a significant increase in buyer interest, pointing out that the average number of viewings per property listing went up by around 30% compared to the previous month. This suggests that more people are actively exploring a move, perhaps encouraged by better mortgage deals and the slight easing of rates.
The government has also set out plans that could further boost market activity. In particular, proposals to create a National Housing Bank aim to support the construction of around 500,000 new homes, which could help first-time buyers and families struggling to get on the housing ladder.
In terms of mortgage borrowing, the figures for May showed an encouraging turnaround. Net borrowing increased by £2.8 billion, lifting the total to £2.1 billion. This follows a sharp fall in April, when net borrowing shrank by £13.8 billion to minus £0.8 billion, reflecting seasonal and economic pressures.
Karim Haji, global and UK head of financial services at KPMG, said this rebound suggests that buyers are starting to feel more confident again, thanks in part to signs that interest rates could ease further over the coming months.
Despite the ongoing challenges of the cost-of-living crisis, Haji pointed out that lower consumer borrowing might mean that rising wages are gradually helping households keep on top of their everyday expenses without relying as heavily on credit.
Looking more closely at rates, the average interest rate for new mortgages dipped slightly from 4.49% in April to 4.47% in May. At the same time, the average rate paid on existing mortgage balances edged up to 3.87%, reflecting how older deals continue to expire and borrowers move onto higher rates.
Simon Gammon, managing partner at Knight Frank Finance, observed that mortgage rates have mostly stabilised. He noted that many popular fixed-rate products are now sitting just below 4%, thanks largely to steady swap rates rather than sudden economic changes.
Remortgaging activity is also expected to rise in the coming months. Gammon highlighted that roughly 1.8 million fixed-rate mortgage deals are due to end in 2025, meaning many households will soon have to look for new deals, often at higher rates than before.
For borrowers who secured five-year fixed rates in 2020, when rates were near historic lows, the jump to today’s rates could mean their monthly repayments will increase by several hundred pounds, depending on loan size and term.
Beyond mortgages, the latest data also revealed a slowdown in consumer credit borrowing. Net borrowing dropped to £0.9 billion in May, which is less than half the £1.9 billion reported in April, pointing to a more cautious approach by households.
Credit card borrowing saw an especially sharp fall, dropping from £1.2 billion in April to just £0.1 billion in May. This suggests that consumers may be trying to reduce reliance on high-interest debt, possibly due to cost-of-living pressures.
Other forms of consumer credit, such as personal loans and car finance, also eased slightly, with net borrowing dipping to £0.7 billion from £0.8 billion a month earlier. Taken together, these figures paint a picture of households becoming more careful with their spending.
Overall, while there are still challenges ahead, these figures suggest a shift in mood. The housing market appears to be regaining momentum, supported by lower mortgage rates, government plans for new homes, and a cautious but improving economic outlook.
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