UK Sees Most Mortgages Approvals in Four Years

You’ll likely know that you need a few things in order to get approved for a mortgage. For example, to increase your chances you will want to have a good credit history, with no defaulted payments. A higher permanent salary goes a long way too. Once you have a mortgage in principle, you’re in a stronger position to put an offer on a house.

High-street banks in the UK have shown that mortgage approvals are at their highest levels since 2015 in December. This is helped by interest rates sitting at a record-low which can attract buyers and make repayments more manageable.

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What increases have we seen?

UK Finance, an industry body tracking 7 high-street banking groups which make up around 2/3 of the market. In December 2019, banks gave the green light to a total of 46,800 mortgages. This is a 6.3% increase from the month before, and 19.6% higher than the previous year. It’s the highest number of approvals since August 2015.

What has caused this increase in mortgage approvals?

It is believed that the increase in approvals is mostly thanks to low mortgage interest rates. We may see another uplift as a result of the general election soon.

The Bank of England’s mortgage tracker has shown the rate drop to 1.98% in November, from 2.72% in Jan 2016. This means that the costs for house buyers is reduced.

The Royal Institution of Chartered Surveyors surveyed UK estate agents and found that in the second half of December 2019, sales and price expectations were at their highest they’ve been in 3 years. This data however doesn’t account for expected growth in mortgages due to the time between when a borrower starts the application process and when they receive a mortgage offer which is usually around a month.

The monthly average of mortgage approvals is 40,000 and approvals dropped below this in 2017, but after that they started climbing in the second half of 2019. This is due to dropping interest rates but also wage growth increasing as well as employment.

If we look at 2019 annually, 982,286 mortgages were approved which is 7.4% more than 2018, with remortgage approvals increasing 7.9% over the same time.

What about the value of mortgage loans?

Since May, the average value for loans saw the second largest increase in December. The average value was £217,000, which is a 2.4% increase on the previous month, November.

What do economists think?

Economists think that despite this, low economic growth and uncertainty will still cause the house market’s revival to be minimal. Even though there are low interest rates, there’s still a housing crisis of a shortage of properties which will continue to harm the market.

Chief Economic Adviser at the Consultancy EY Item Club said “The economy still looks set for a pretty challenging 2020 and there will still be appreciable uncertainties, including on the UK-EU relationship front – so that the upside for house prices in 2020 is likely to be limited.”

What do you think?

We’d love to know what our readers think – have you decided to go ahead and apply for a mortgage recently. How have you found it? Let us know in the comments below!