Following a subdued performance in April, the latest Money and Credit report from the Bank of England suggests a more optimistic outlook for the UK mortgage market.

In May, net borrowing of mortgage debt by individuals rose by £2.8bn, reaching £2.1bn. This follows a significant downturn in April, when net borrowing dropped by £13.8bn to -£0.8bn. The annual growth rate of net mortgage lending showed a modest increase, edging up from 2.5% in April to 2.6% in May. Gross mortgage lending also climbed, reaching £20.4bn in May, compared to £16.9bn the previous month. Meanwhile, gross repayments declined slightly to £17.6bn in May from £18.2bn in April.

There was a rise in net mortgage approvals for house purchases, considered a forward-looking indicator of borrowing, which increased by 2,400 to 63,000 in May. This marks the first increase since December 2024. Remortgaging approvals, which reflect switches to different lenders, also grew by 6,200 to 41,500—the largest monthly gain since February 2024.

Propertymark CEO Nathan Emerson commented on the findings: “It is incredibly positive news to see an increased number of mortgage applications approved. It is one of the loudest signals of them all regarding consumer affordability, and it is also a massive vote of confidence from lenders in the longer-term prospects of the economy too.” He continued: “As we head into the summer months, we have witnessed on average the number of viewings per property available see an uplift of around 30% compared to the month previous.” Emerson also highlighted a recent government pledge: “On top of this, we have also seen the UK Government make a pledge to create a National Housing Bank which could bring significant investment to help build 500,000 new homes, enabling a potential greater degree of flexibility for those who aspire to buy.”

Karim Haji, Global and UK Head of Financial Services at KPMG, noted the broader implications: “The gradual easing of interest rates could be helping to boost confidence and demand amongst mortgage borrowers.” He added: “The cost of living remains high, but a drop in consumer borrowing in May signals that rising incomes are starting to feed through to the cost of day-to-day expenses.” Haji also suggested future trends may hinge on monetary policy: “Borrowers may also be awaiting further movement on the Bank of England’s base rate before deciding to take out more credit although falling mortgage rates may help increase confidence and appetite.” 

More News: News & Blog Page

Source: David Burrows, Mortgage Strategy