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UK mortgage approvals hit 17-month high, says Bank of England

UK mortgage approvals hit 17-month high, says Bank of England

UK mortgage approvals beat expectations in February to hit their highest in 17 months, according to official data that reflects the fall in borrowing costs since the middle of last year.

Net mortgage approvals for house purchases rose to 60,400 in February from 56,100 in January, the Bank of England said on Tuesday. The figure exceeded the 56,500 forecast by economists in a Reuters poll and was the highest since September 2022.

The “effective” interest rate — the actual interest rate paid — on newly drawn mortgages fell 0.29 percentage points to 4.9 per cent in February, according to the central bank. It was the lowest rate since August 2023. 

Mortgage approvals and house prices are closely monitored by interest rate-setters as timely indicators of the health of the property market, which affects the wider economy and is important for monetary policy decisions. The figures on Tuesday suggest the recovery in the housing market is continuing on the back of mortgage rates declining from their peaks in summer 2023.

The fall in most quoted fixed rates since the second half of last year reflects expectations that the Bank of England will this year cut interest rates from a current 16-year high of 5.25 per cent. Some quoted mortgage rates have edged up since February because of sticky services inflation, a move reflected in the month-on-month drop registered by Nationwide in March. But analysts said the property market was on the mend.

Source: Financial Times - Valentina Romei