Property market bouncing back as mortgage approvals hit highest levels in four years – but experts warn loan rates could start creeping up
- Mortgage approvals up 4.4 per cent in January to highest level in four years
- Remortgage approvals also rose by 3.9 per cent in the first month of the year
- But experts warn lenders have started to creep up mortgage rates
Mortgage approvals for homebuyers soared to their highest levels in four years in January as the bounce seen before the general election continued to buoy the market.
Approvals, which indicate the strength of future borrowing, rose to 70,900 in the first month of the year, some 4.4 per cent higher than in December and the highest since February 2016. Approvals for remortgages also rose by 3.9 per cent to 52,100.
It takes on average four to six weeks for a mortgage to be approved, so it’s likely these approvals represent applications made in both the run-up to and in the immediate aftermath of the general election.
Net mortgage borrowing was £4billion in January, slightly below the £4.3billion average seen over the past six months.
Approvals, an indicator for future borrowing, rose to 70,900 in the first month of the year
Simon Gammon, managing partner at Knight Frank Finance, said: ‘Many that have waited for political clarity before making significant financial decisions are pushing on.
‘Growth in re-mortgaging has been particularly strong and the ongoing rate war among the high street lenders means borrowers have been spoilt for choice when it comes to attractive deals.
‘However, in the past fortnight we’ve seen a couple of lenders edging rates up, suggesting borrowing costs may climb in the months ahead.’
Andrew Montlake of mortgage broker Cicero
Andrew Montlake, managing director of mortgage broker Coreco, said: ‘A combination of Brexit lethargy in the closing stages of 2019 and Boris Johnson’s landslide General Election win saw a major bounce back for mortgage approvals in January.
‘During November and the first half of December many people sought to get their houses in order before the nation went to the polls. Once the General Election result was in even more people started to make their move.
‘Homeowners and prospective buyers alike are wary of future house price rises and are seeking to buy property before the market moves against them. People are also locking into the exceptional fixed rates currently available.
‘The big question is how long the Boris Bounce lasts, as while there is a sense of optimism at present that could fade very quickly if trade negotiations turn sour.’
House prices rise at the fastest pace for 18 months
Last week Nationwide’s monthly house price index indicated that house prices are rising at the fastest annual pace in 18 months.
The cost of the average home edged up by £200 in February to £216,092, according to the index, with house price inflation reaching 2.3 per cent.
The figures based on mortgage approvals provided further evidence that a pick-up in the property market that began before the election in December accelerated in the New Year.
House prices have risen in recent months as property market activity picked up before and after the election
Robert Gardner, Nationwide’s chief economist, said: ‘While overall economic growth ground to a halt in the final three months of 2019, labour market conditions remained buoyant and borrowing costs low. The decisive election outcome may have provided a boost to buyer sentiment.’
He added: ‘Recent data releases indicate that the housing market has gathered momentum in recent months and the latest house price figures are in line with that trend.
‘The number of residential property transactions and mortgages approved for house purchase increased around the turn of the year and surveyors have reported an increase in new buyer enquiries.’
What will happen to house prices in 2020?
The new decade may have started with a renewed sense of optimism in the property market but dramatic rises in house prices are unlikely, experts have warned.
Instead, economists have mostly forecast a steady 2 per cent rise in annual average property prices over the course of the year.
Lawrence Bowles, of estate agents Savills, experts prices to rise by just 1 per cent over the course of the year.
Broken down by region, Savills expects the North West and Yorkshire to have the fastest house price growth over the next five years.
This is partly because house prices in these regions didn’t recover as quickly as in the South following the financial crash, meaning there is more room for growth.
The Royal Institution of Chartered Surveyors was slightly more optimistic about the potential for national average growth over the next year, forecasting a rise of 2 per cent.
Annual house price inflation has picked up since last year but remains at a low level
Rightmove also recently predicted that the average price tag on a home will increase by 2 per cent over the next year, with northern regions performing more strongly than those further south.
EY Item Club has also predicted a 2 per cent rise, while Yorkshire Building Society forecast a rise of between 0 and 2 per cent, and Halifax forecast a rise of between 1 and 3 per cent.