Net mortgage approvals rose by 3,700 over the month of October as “confidence returned to the market”, according to data from the Bank of England.
The research, Money and Credit - October 2023, revealed there were 47,400 mortgage approvals in October, an increase on the 43,700 recorded in September.
Frances McDonal, director of research at Savills, said the data highlighted some confidence was beginning to return to the market as mortgage rates have continued their downward trend since the summer.
“But buyers are still adjusting their budgets to the higher interest rate environment,” she cautioned.
“As a result, Savills has forecast that cash buyers will make up 43 per cent of the transactions in 2023 - far higher than the 35 per cent seen pre-pandemic.”
However, Fuse co-founder and chief executive Sho Sugihara, warned: “Although renewed consumer confidence is welcome, lenders need to ensure that they are proactively analysing not just affordability but also the potential financial vulnerability of borrowers.
“The full impact of interest rate rises has yet to be felt and, with a third of lenders reporting an increase in borrower defaults over the last 12 months, we’re not out of the woods yet.
“By utilising a wider range of insights and taking a more holistic view of borrower finances, lenders can protect borrowers at a much earlier stage and offer personalised support to prevent arrears and defaults.”
A similar pattern was discovered in remortgages with net approvals increasing from 20,600 in September to 23,700 in October.
Household deposits
The Bank also found households deposited, on net, £4.6bn with banks and building societies in October, the second highest since November 2022 when it was £4.8bn.
This was driven by net inflow to interest-bearing time deposits of £4bn, following inflows of £5bn in September.
This was partly offset by net outflows from non-interest bearing sight deposit accounts amounting to £1.7bn in October, following net outflows of £2bn in September.
Additionally, there were zero net flows of interest-bearing sight deposits in October, which followed net outflows of £6.2bn in September, and 12 months of consecutive net withdrawals from these accounts.
Interest rates
It was also revealed the effective interest rate paid on individuals’ new time deposits with banks and building societies rose by 6 basis points and now sits at 5.27 per cent.
Similarly, the effective rate on the outstanding stock of time deposits saw a 15 basis point increase to 3.52 per cent in October, while the effective rate on stock sight deposits rose from 1.96 per cent in September to 1.99 per cent October.
Repaid interest
It was also revealed individuals repaid, on net, £100mn of mortgage debt in October, a fall on the £1bn of net payments that was recorded in September.
Additionally, gross lending fell from £18.1bn in September to £16.2bn in October and gross repayments decreased from £19.5bn to £17.2bn over the same period.
tom.dunstan@ft.com
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