In a heartening turn of events, mortgage approvals in the UK soared in February, surpassing the 60,000 threshold for the first time since the turmoil induced by Liz Truss’s mini-budget. To delve into the nuances behind this significant shift, I sat down with Shaun Sturgess, director at Sturgess Mortgage Solutions, to glean insights from his professional vantage point.
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When Shaun Sturgess welcomed me into his office on a drizzly Tuesday morning, his enthusiasm was palpable. “It’s been a rollercoaster since last September,” he admitted, alluding to the chaotic aftermath of Liz Truss’s mini-budget, which had sent shockwaves through the lending market. However, his tone shifted to one of optimism as he continued, “February’s numbers really paint a different picture. We’re seeing a resurgence in buyer confidence.” According to the latest data from the Bank of England (BoE), the number of mortgage approvals to home buyers rose from 56,100 in January to 60,400 in February. This 7.7% month-over-month increase marks a 39.8% year-over-year surge from February 2023, which only saw 43,207 approvals. The last time mortgage approvals were this high was in September 2022, with a peak of 65,349.
Discussing the factors behind this surge, Shaun highlighted the competitive landscape among lenders at the start of the year. “There was a rate war,” he explained, “and this made mortgages more accessible. Banks were keen to offer lower rates as they anticipated several interest rate cuts in 2024.” This strategy appears to have paid off, as evidenced by the increased number of approvals. The effective interest rate on newly drawn mortgages fell from 5.2% in January to 4.9% in February, providing further incentive for potential homeowners. The average interest rate dropped by 29 basis points, settling at 4.90% in February. “These lower rates undoubtedly played a role in boosting buyer confidence,” Shaun noted.
One of the more intriguing aspects of our conversation was the role first-time buyers played in this trend. “We’ve seen strong demand from first-time buyers,” Shaun said, “and that’s likely driving these numbers.” This aligns with the broader market sentiment. Jonathan Samuels, CEO of Octane Capital, has pointed out that the acceleration in mortgage approvals is an initial indicator of market health, returning to levels not seen since 2022. The BoE’s report also revealed a rise in approvals for remortgaging, from 30,900 in January to 37,700 in February. “This is another positive sign,” Shaun added. “Homeowners are looking to secure better deals, which is a good indicator of economic stability.” However, Shaun was quick to temper expectations. “While this rebound is promising, it’s important to remember that the market is still volatile. We’re not out of the woods yet.” Ashley Webb, UK economist at Capital Economics, echoed this sentiment, warning that the rebound in approvals is “unlikely to continue in the near term.”
As we wrapped up our conversation, Shaun reflected on the future. “The Bank of England has left interest rates unchanged at a 16-year high of 5.25% for the fifth consecutive time in March. Traders are widely expecting the first rate cut to take place this summer, either in June or August. If that happens, we could see a more sustained recovery.” He also mentioned the broader economic context. “Consumer credit grew at an annual rate of 8.7% in February, down slightly from 9.0% in January. While this might seem like a minor detail, it’s indicative of the cautious optimism we’re seeing among consumers.”
The rise in mortgage approvals in February marks a significant milestone, signalling a potential return to pre-mini-budget levels of market stability. While the lending landscape remains complex and somewhat unpredictable, the data offers a glimmer of hope for homebuyers and economists alike. As Shaun Sturgess aptly summarised, “It’s a step in the right direction, but we need to remain vigilant. The market is showing signs of recovery, but it’s still subject to the broader economic forces at play.” For now, at least, there is a sense of cautious optimism as the UK mortgage market navigates its way through these turbulent times.
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