In an encouraging sign for the housing market, mortgage borrowing leapt by £1.2 billion to £5.5 billion in September.
It’s the highest it has been since March, as homebuyers pressed ahead with their purchases, despite widespread speculation about the approaching Autumn Budget and the effect it may have on house prices.
And, for the first time since rates began climbing in 2022, purchasing activity is now outpacing remortgaging. Purchase approvals were up by as much as 1,000 to 65,900, whilst remortgaging dropped very slightly by 600 to 30,400. What it shows is that buyers are committing to property purchases whilst homeowners who needed new deals have now largely secured them. What remains is a steady flow of those refinancing after reaching the end of fixed terms.
At the same time, lending is expanding and finance costs are falling, with average rates on newly drawn mortgages down seven basis points to 4.19% – their lowest level since January 2023. Gross lending reached £24.9bn, up from £23bn in August, suggesting affordability and lender appetite are both improving.
Buyers adapt to higher rates
Richard Donnell, executive director at Zoopla, also points out that mortgage approvals for home purchases have risen by 19% year-over-year, as demand returns to pre-pandemic levels.
And he adds that: “The average mortgage rate for new loans was higher at 4.5%, showing how the housing market has adjusted well to higher mortgage rates over the last two years, with income growth working hard to support affordability.”
The Bank’s figures also show that annual growth in net mortgage lending stood at 3.2%, which is its highest since January 2023. Donnell expects this to continue: “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.”
Budget speculation takes back seat
John Phillips, CEO of Just Mortgages and Spicerhaart, acknowledges there is some buyer hesitation. “There’s no doubt we are seeing an element of wait-and-see right now, which hopefully gives way to some pent-up demand once the Budget is cleared and everyone knows the lay of the land.”
But the data clearly shows that there aren’t that many buyers waiting.
Lender pricing improves
And he notes the improving conditions for borrowers: “Lenders are keen to lend and have the funds available to do so. Falling swap rates, which underpin the pricing of fixed-rate mortgages, are encouraging some of the big names to reduce mortgage rates as they look to pick up more business before the year-end.”
Swap rates, which are the cost at which lenders fund mortgages, have been falling since the summer, providing lenders with room to cut rates without squeezing margins.
Overall, though, the Bank of England’s September lending figures point to a market operating on fundamentals rather than political speculation, with buyers and lenders making decisions based on what they know, not what they fear.
