Mortgage approvals up after pause in interest rate rises

Lenders approved more mortgages for house purchases in October, in a sign that the UK property market is stabilising.

The number of mortgages approved for home buyers rose to 47,400 from 43,700 in September, according to new data from the Bank of England. Approvals for remortgaging with another lender also increased, from 20,600 in September to 23,700 in October.

It comes after interest rates were left unchanged at 5.25% following 14 consecutive rate increases.

Jason Tebb, chief executive of property website OnTheMarket.com, said it was "clear that the pause in interest rate hikes has boosted market stability and buyer confidence".

He added: "Borrowers are daring to believe that base rate may have peaked, giving them a better idea of where they stand and what they can commit to when it comes to a property purchase.

"As lenders continue to reduce mortgage rates, this will further boost affordability."

Mortgage rates down, availability up

The pause in interest rate rises -- and the expectation that rates have now peaked -- led to a decrease in the longer-term interest rates (swap rates) that underpin fixed rate mortgage pricing.

Average rates for both a two-year and five-year fixed mortgage deal fell for a third consecutive month at the start of November, according to financial data provider Moneyfacts. The average two-year fixed rate stood at 6.29%, down from 6.47% in October, while the average five-year fixed rate fell to 5.86% from 5.97%.

Product availability has also improved. There are currently 5,678 mortgage products on the market -- the highest level since March 2008.

Alongside the average shelf-life of mortgage deals rising to 20 days in November, these are "promising signs" the market is settling, said Rachel Springall, finance expert at Moneyfacts.

Single first-time buyers priced out

Affordability is still an issue for many prospective buyers, however.

In the Autumn Statement, Chancellor Jeremy Hunt extended the mortgage guarantee scheme by 18 months, from December 2023 to June 2025. This scheme is designed to increase the availability of 95% loan-to-value mortgage products, in order to help borrowers with smaller deposits buy a home.

However, the impact of this extension may be limited as many lenders are already offering 5% deposit deals outside of the government scheme, and high property prices remain a significant barrier.

A new analysis by property website Rightmove has revealed that single first-time buyers on an average salary and with a 5% deposit could not afford three-quarters of properties for sale in the typical first-time buyer market (such as studio flats and one- and two-bedroom flats and houses).

Single first-time buyers in London face the biggest challenge, with just 2% of studio, one- and two-bedroom properties classed as being within reach on an average London salary and with a 5% deposit, compared to the North East, where solo first-time buyers could afford 67% of properties.

For those able to buy with a partner, friend or family member, options greatly open up to buyers with a small deposit, Rightmove found. Two first-time buyers on an average salary could afford 70% of smaller properties across Great Britain with a 5% deposit, due to the increased borrowing power.