The number of mortgages being approved to home buyers fell back in January, following an increase in December, according to Bank of England figures
The number of mortgage approvals for home buyers decreased in January, after seeing a rise in December according to the Bank of England’s latest figures.
There were 66,200 house purchase mortgages approved in January, which is about 300 less than December’s figures, despite a month-on-month increase of around 400 approvals seen then. From April, stamp duty discounts are poised to be less attractive for some property purchasers in England and Northern Ireland.
Simon Gammon from Knight Frank Finance observed: “The mortgage market remained busy in January, largely due to first-time buyers squeezing deals through ahead of the changes to stamp duty and needs-based buyers that had put off acting during the volatility of 2024.”
Meanwhile, Alice Haine of Bestinvest by Evelyn Partners said: “UK mortgage approvals – an indicator of future borrowing – edged down slightly in January despite the stamp duty stampede as buyers raced to beat the deadline at the end of March when the temporary increases to the property tax thresholds reverse.
“Borrowing costs remain relatively high when compared to the era of cheap money that preceded the start of the (Bank of England’s) monetary tightening cycle in December 2021.”
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “January was fairly bleak for the mortgage market, with the number of approvals for new purchases falling slightly. Bond market dramas at the start of the year pushed mortgage rates up a little. It didn’t make an enormous difference to rates, and the rate on new mortgages rose by just four basis points to 4.51%. However, the drama itself was enough to unsettle buyers.
“There’s also a decent chance that buyers have decided they’re too late to take advantage of the stamp duty holiday by the end of March, which will have meant demand eased further.”
Jeremy Leaf, a north London estate agent, observed changes in preferences among house hunters and said: “What we have noticed in our offices is more interest in viewing houses – rather than flats – but increasing concerns about job security, inflation and pace of future interest rate cuts. This, along with more choice, has meant protracted negotiations and lengthening transaction times.”
Meanwhile, Zoopla executive director Richard Donnell provided a contrasting perspective suggesting a resilient market: “The latest signs are that demand continues to grow and we expect 5% more home sales than last year, with house prices rising 2.5% over 2025.”
Looking over the figures for non-mortgage borrowing in January, it turns out net consumer credit borrowing by households jumped to £1.7bn, up from £1.1bn just the month before. In this lot, net borrowing on credit cards shot up to £1.1 bn in January – this hot hike was the biggest seen since a £1.2bn rise recorded in November 2023.
Karim Haji, global and UK head of financial services at KPMG, said: “The sharp rise in borrowing suggests that many households struggled to stretch disposable incomes between Christmas and January pay packets. Coupled with the sharp rise in headline inflation due to rising transport, energy and food prices, as well as annual tax returns, January was a difficult month for many.”
Households’ deposits with banks and building societies increased by £8.4bn in January, following net deposits of £4.7 billion in December, the Bank’s Money And Credit report said. Thomas Pugh, economist at RSM UK, observed that the uptick in credit card spending might indicate some shoppers are feeling more confident.
He also noted: “But the big increase in cash in households’ bank accounts also suggests that consumers aren’t done saving yet. Until there is a revival in animal spirits and consumers feel confident enough to spend rather than save, the economy will continue to under-perform.”
Financial information website Moneyfactscompare.co.uk said on Monday that the average fee charged on fixed-rate mortgage deals has increased since 2020. At £1,129, the average fee currently charged on a fixed-rate mortgage deal (excluding no-fee products) has risen by £89 since March 2020, the website said.
Finance expert Rachel Springall from Moneyfactscompare.co.uk commented: “The lowest fixed mortgages on the market typically charge upfront fees of around £1,000, or even up to £2,000, so a mortgage with a slightly higher initial fixed rate and lower product fee could be a better choice.”
Meanwhile, UK Finance, the banking and finance industry body, released a report indicating that mortgage regulations over the past decade have “disproportionately impacted” the deposit amounts required by first-time buyers in London.
The report highlighted that particularly in and around London, first-time buyers are having to find larger deposits due to smaller loan sizes being available. It stated: “The layering of regulation, combined with house prices outstripping wage growth, has therefore made it more challenging for prospective buyers to access mortgage credit without substantial external financial support, such as assistance from family.”
In a move to address these issues, the Financial Conduct Authority announced in January that it would “begin simplifying responsible lending and advice rules for mortgages”.