Mortgage Rates Fall For First Time Since 2021

Recent data from the Bank of England suggests a potential easing of the impacts of high-interest rates, providing a glimmer of optimism for the UK mortgage industry.

In December, the number of new mortgages approved reached a level not seen in seven months, marking a positive shift in the market. According to the Bank’s money and credit data published on the 30th January 2024, a total of 50,500 new mortgages were approved during the month. This figure represents a notable increase compared to the preceding months and is particularly significant as it has not been reached since May of the previous year.

Simultaneously, there was a positive development in the average interest rates for new mortgages. The data reveals a drop in interest rates for the first time since November 2021. The average interest rate for new mortgages decreased by 0.06 percentage points, settling at 5.28%. This reduction in interest rates could potentially make homeownership more accessible and attractive to prospective buyers.

However, amidst these positive indicators, a decline of £830 million in net mortgage lending was recorded. This unexpected decrease contrasts sharply with the £250 million rise those economists polled by Reuters had anticipated. This unexpected dip in net mortgage lending suggests that challenges persist within the mortgage industry, despite the positive trends observed in mortgage approvals and interest rates.

House-buying activity had been depressed as mortgages grew more expensive following 14 consecutive interest rate hikes by the Bank. The continuous Bank rate rises brought the rate to 5.25% in August, a high not seen since 2008 and a position that has been held in subsequent interest rate decisions by the regulator.

In addition to the surge in mortgage approvals, Tuesday’s data revealed a growth in the number of people remortgaging, increasing from 25,700 in November to 30,800 in December. This trend indicates a strategic response to the evolving mortgage landscape, as homeowners seek to capitalize on favourable market conditions.

The positive trend of increased mortgage approvals may be likely to continue as the average mortgage rate on offer for a five-year fixed deal has dropped to 5.18%, and for the typical two-year fixed product, it stands at 5.56%, according to financial information company Moneyfacts. Some high street lenders, including the UK’s largest building society, have recently reduced a number of the mortgage rates on offer, further contributing to the favourable conditions for prospective homebuyers.

As the mortgage industry shows signs of resilience and adaptation to changing economic conditions, it remains to be seen how these developments will influence future rate decisions and impact the broader economic landscape. The Bank’s rate-setting committee is set to publish the latest inflation and growth forecasts along with its outlook for future rate decisions, providing further insights into the trajectory of the UK mortgage industry.

“The last few months have seen positive developments in rates for many borrowers with the trajectory of rates generally being a downward one. We continue to monitor the market for our clients to ensure they are getting the best deal and being prepared to shop around while remaining flexible to switch to a better option if it becomes available remains key. 2024 is shaping up to be a much more positive year for mortgage borrowers.” 

Chris Lees, Mortgage and Protection Director at Resolve Financial Solutions.

If you would like to speak to us about your mortgage, then please get in touch. 

*Please note: Your home maybe repossessed if you do not keep up repayments on your mortgage or other loans secured on it.

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