Lenders completed £23.4bn in gross mortgage loans in January, a marginal rise on the £23bn lent in December, figures from the central bank showed.
The Bank of England Money and Credit data showed that the value of mortgages lent was also lower than the six-month average of £23.8bn. Mortgage repayments rose from £18.8bn in December to £19.1bn in January, also below the six-month average of £20bn.
The data showed that the net borrowing of mortgage debt by individuals fell to £4.1bn in January, compared to £4.5bn. Again, this was lower than the six-month average of £4.5bn.
The annual growth rate for net mortgage lending decreased slightly from 3.4% in December to 3.3% in January.
Small fall in mortgage approvals
The Bank of England recorded minor decreases in the number of mortgages approved in January when compared to the previous month.
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In January, 60,000 loans were approved for house purchase, compared to 61,000 in December. Meanwhile, approvals for remortgaging fell from 38,400 to 38,100.
The cost of borrowing continued to fall as the effective interest rate on new mortgages decreased from 4.15% to 4.09% month-on-month. Further, the rate on outstanding mortgages dropped from 3.92% to 3.9%.
Lingering effect of Autumn Budget uncertainty
Jason Tebb, president of OnTheMarket, said the inactivity and uncertainty seen in the run-up to the Budget continued to “make itself felt” in January.
He added: “Post-Budget clarity has since helped steady confidence and given buyers and sellers encouragement to press ahead with their plans.
“Last year’s rate reductions had a positive impact on activity, and further cuts this year should boost activity and transactions. The rate on newly drawn mortgages continue to fall, which will help ease affordability challenges.”
Mark Harris, chief executive of SPF Private Clients, said although there was a fall in mortgage approvals, “there is an underlying resilience to the housing market, which is starting to make itself felt now that the Budget is out of the way,” and added that affordability was continuing to ease.
“As we move towards spring, the good news for borrowers is that lenders are keen to lend and have the funds available to do so. Many of the big lenders have reduced their mortgage rates, and while some have increased pricing, we expect rates to jump around, rather than significantly move one way or another,” Harris said.
Simon Gammon, managing partner at Knight Frank Finance, said: “Mortgage approvals fell in January, reflecting the economic uncertainty that lingered after the November Budget and weighed on borrower confidence. However, leading indicators published over the past month, including asking prices, suggest activity recovered into February as borrowing costs eased.
“The outlook for activity and rates appeared relatively benign only last week, but conflict in the Middle East has introduced fresh uncertainty. Any spike in oil prices could fuel global inflation or, at the very least, prompt central banks, including the Bank of England, to delay further rate cuts until the outlook becomes clearer.”
