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Mortgage approvals hit 13-year high as housing market remains busy

With the UK property market booming, mortgage approvals reached nearly 100,000 in October. Are mortgage availability and interest rates on the rise now?

UK lenders approved 97,532 mortgages during the month of October. This is the most in 13 years with numbers not reaching that level since September 2007. Hitting nearly 100,000 mortgage approvals, this is 33% higher than approvals in February.

Bank of England’s Money and Credit data shows mortgage approvals have increased each month in the past few months. In May, the number of mortgage approvals fell to 9,335. Since then, mortgage approvals have increased tenfold.

Increased mortgage availability

Mortgage product numbers fell dramatically back in March and haven’t recovered fully since, but there have been strong improvements in availability. This can allow more homebuyers and investors to not only purchase a home but also potentially take advantage of the temporary stamp duty holiday. Lenders are gaining confidence and are continuing to assess their products to meet growing demand.

Overall mortgage product availability increased for the second month in a row. The number of products available jumped to 2,782, which is an increase of 378 since November. This is the largest monthly increase since November 2014, according to Moneyfacts.

Eleanor Williams from Moneyfacts says: This growth may be a reflection of lenders reacting to not only the level of pent-up demand from those looking to move following the first lockdown, but also the flood of would-be borrowers hoping to complete their new mortgage in time to benefit from the temporary stamp duty land tax holiday.”

Although there are fewer products available than at this time last year, the mortgage market is continuing to recover, and more and more products are becoming available. This is welcome news for homebuyers and investors seeking mortgages.

Moneyfacts have particularly seen availability increase in both 90% and 85% loan-to-value (LTV) mortgages, which require 10% and 15% deposits. However, buyers looking for a loan with a 5% deposit still have few options to choose from, but those that are first-time buyers could look at applying for the new Help to Buy scheme.

Interest rates on the rise

Interest rates have been at record lows. Earlier this year, the Bank of England lowed the base rate to just 0.1%. Mortgages costs and interest rates are on the rise, but the average rate is still below the rate at the start of 2020.

For the fifth month in a row, the average two-year fixed rate mortgage has increased and now sits at 2.49%. However, interest rates for five-year fixed rate mortgages have reduced by 0.1% this month to 2.69%.

Homebuyers and investors looking to purchase property can take advantage of competitive rates now before they potentially rise even more. Locking in these interest rates can allow buy-to-let landlords to secure better deals and in turn make more from their investment.

Eleanor Williams concludes, “With no guarantee that rates will not continue to climb, those hoping to proceed with a mortgage soon would be well advised to secure the support and knowledge of a qualified independent adviser to enable them to search for the best product for their circumstances.”

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