With interest rate cuts expected in the next few months, it’s not just the UK weather that’s looking brighter. Momentum has started to pick up in the housing and mortgage markets, and we’re here to break down what the latest figures mean for you.

 

An optimistic Bank of England signals rate cuts

The Bank of England voted to keep the base rate of interest at 5.25% at their most recent meeting in January, following news that inflation had stayed unchanged at 4%.¹ Inflation is forecast to fall to its target rate of 2% by June, but this month, Governor Andrew Bailey signalled that rates could be cut even sooner. He commented, “We don’t need inflation to come back to target before we cut interest rates… I must be very clear on that, that’s not necessary.”

Lenders are taking a slightly more cautious approach to setting interest rates on their mortgage products, and most high street banks have temporarily pulled any mortgage deals with rates below 4%. But, don’t be disheartened if you’re looking to get a mortgage soon, as rates are always on the move due to lender competition. It’s possible that mortgage rates will start to drop again in the next few weeks if positive inflation news hits the headlines, so use this time to get your paperwork together, ready to look for a new deal soon. Moneybox mortgage brokers compare thousands of mortgage deals from across the market, from over 90 lenders. Head in-app to Accounts > Mortgages to find the right mortgage for you, and get free mortgage advice from our expert team.

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Mortgage approval numbers continue to pick up 

UK mortgage approval figures track the number of house purchase transactions involving a mortgage. Being approved for a mortgage is one of the first stages involved in buying a home, so these numbers are a good real-time indicator of how confident home-buyers are feeling about the market.

In February, UK mortgage approvals reached a seven-month high, climbing to 55,200 – up from 50,450 in December. It’s the highest they’ve been since October 2022.² Although monthly approvals are still relatively low, it’s been really encouraging to see a continued monthly increase in the number of people in the UK getting mortgages, while rates have been lower.

 

House prices rebound

Both buyers and sellers have been tempted back to the market, encouraged by cheaper mortgage deals and a slightly more positive economic outlook. As a result, all major house price indices are reporting that house prices are on the rise again.

The UK House Price Index is backward-looking and tracks the prices of all sold properties in the UK, as recorded in the Land Registry. It’s the most accurate index, but there’s a two month delay in the data. It reported a 0.1% increase in average prices in December compared to the previous month.³ While it’s a small increase, any increase during this seasonal lull is a positive sign that confidence is starting to filter through to the housing market.

Lender house price indexes, like Halifax and Nationwide, are much more up-to-date but nowhere near as representative of the market, as they only include their own mortgage lending data. Halifax said that prices rose by 1.3% in January compared to December,⁴ whereas Nationwide reported a smaller 0.7% month-on-month increase.⁵

Home sellers across the UK have jumped on this, and Rightmove reported that asking prices on their platform rose in February, across all UK regions. The average price of a property advertised on Rightmove in February was 0.9% higher compared to January.⁶

 

¹ Source: Office of National Statistics (ONS) CPI Annual Rate of Inflation

² Source: Trading Economics, UK Mortgage Approvals for February 2024

³ Source: GOV.UK Land Registry (UK House Price Index for December 2023)

Source: Halifax House Price Index, January 2024

Source: Nationwide House Price Index, January 2024

Source: Rightmove House Price Index, February 2024