Mortgage approvals hit an eight-month high
Mortgage approvals hit an eight-month high after thousands of homeowners race to snap up deals as fears of interest rate hikes loom
- Borrowers have rushed to secure deals as lenders pulled hundreds off market
- READ MORE: The UK towns and cities facing mortgage meltdown
The number of mortgage approvals reached an eight-month high in June as thousands of homeowners raced to snap up deals amid fears of interest rates rising further.
Around 54,700 mortgages were approved – the highest level since last October when 59,000 home loans were granted, according to the Bank of England.
Nearly three in four were taken out by existing homeowners fixing on a new deal, with 39,100 re-mortgages approved. This marked a 15 per cent increase on May.
Borrowers have rushed to secure deals as lenders pulled hundreds off the market amid a rate rise frenzy.
There are fears that a further increase in interest rates – which is expected to be voted through on Thursday at the Bank of England’s monetary policy meeting – could spur a new round of rate rises.
Rising mortgage rates will continue to apply pressure on house prices, Thomas Pugh, an economist at consultant RSM UK, said (stock image)
Last month, the Bank voted to increase its base rate to a 15-year high of 5 per cent and is expected to pass another 0.25 percentage point increase this week.
In June, borrowers locked in to an average interest rate for new mortgages of 4.63 per cent in June, up from 3.88 per cent just six months ago. However, average two-year fixed-rate deals have since surged to 6.81 per cent yesterday, according to analysts MoneyfactsCompare.
Lenders have been forced to suspend their mortgage deals temporarily over the last six weeks after being swamped by applications from borrowers rushing to re-finance.
This was triggered by higher-than-expected inflation data, suggesting the Bank would have to raise rates further to combat stubborn price rises.
Jeremy Leaf, a north-west London estate agent, said: ‘The number of approvals is higher than expected despite the market still being unstable.
‘The latest inflation figures have persuaded some people that rates may continue to go up as they near their peak, so a lot of people have decided now is the time for them to act.’
Rising mortgage rates will continue to apply pressure on house prices, Thomas Pugh, an economist at consultant RSM UK, said.
Property prices have already started to fall, with a typical home now worth £286,000 after seeing £7,000 wiped off its price since values peaked in September, according to the Office for National Statistics (stock image)
‘We expect the peak in house prices to fall by around 10 per cent with the risk of bigger falls if the base rate rises above 6 per cent,’ he added.
Property prices have already started to fall, with a typical home now worth £286,000 after seeing £7,000 wiped off its price since values peaked in September, according to the Office for National Statistics.
The news comes as homeowners put £19.8billion towards servicing their mortgages in June, an increase of £0.8billion on the previous month, according to the Bank of England.
One in four have overpaid on their mortgages in an attempt to pay down their debts before they are forced on to a higher rate, according to Barclays.
The amount lent to homeowners also increased for the second consecutive month, up from £19billion in May to £20billion in June.
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