February borrowing and approvals rise, though energy and inflation risks cloud the outlook
Mortgage approvals rose in February, with house purchase approvals increasing to 62,600 from 60,200 in January and remortgaging approvals up to 41,200 from 38,500.
Net borrowing of mortgage debt by individuals also increased to £4.8 billion in February, from £4.2 billion in January, above the previous six-month average of £4.5 billion.
The annual growth rate for net mortgage lending edged up to 3.4% in February, from 3.3% in January.
Secured gross lending increased slightly to £23.9 billion in February, up from £23.6 billion in January and marginally above the six-month average of £23.7 billion. Repayments fell to £18.4 billion from £18.8 billion, remaining below the six-month average of £19.9 billion.
The “effective” interest rate on newly drawn mortgages rose marginally to 4.10% in February, from 4.09% in January. The rate on the outstanding stock of mortgages increased to 3.95% from 3.90%.
“Today’s figures paint a nuanced picture,” said John Phillips, chief executive of national brokerage Just Mortgages. “On the one hand, a rise in net borrowing to £4.8 billion points to buyers continue to push on with transactions. On the other hand, approvals, while up on the month, remain below trend, showing a level of hesitation that hasn’t fully disappeared.
“These figures reflect a market that’s active, but more selective. Demand hasn’t gone away; it’s become more deliberate. Those who need to move are getting on with it, while others are taking longer to commit as they weigh up affordability and timing.”
For some industry experts, however, the green shoots of recovery in household finances may be short-lived, with uncertainty set to stamp them out, despite an increase in mortgage borrowing in February.
“The Bank of England’s figures for February paint an improving picture of household finances with heartening levels of mortgage borrowing,” said Richard Pinch (pictured right), senior risk director at credit advisory consultancy Broadstone. “It suggests that consumer confidence was beginning to return on the expectations of falling borrowing costs, while the data also shows increased consumer credit borrowing and savings as budgets stabilised.
“However, the data already appears significantly out of date given the events in the Middle East through March as the disruption to energy supplies risks sparking a global energy crisis with wide-reaching impacts on UK consumers. The green shoots of encouragement look set to be stamped out as increased energy bills are inevitably likely to lead to broader inflationary pressures throughout the economy.
“Lenders will hope that the looser regulatory regime for mortgage borrowing will help maintain demand in the market against this uncertain backdrop and that the fragility of the economy will not lead to interest rate rises on the same scale as following the Russian invasion of Ukraine.
“Meanwhile, the affirmation of the Mortgage Charter following the Chancellor’s meeting with banks late last week is a positive step towards using tailored affordability assessments and flexible payment options to help borrowers through tailored, targeted support.”
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