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Monthly mortgage update

By David Baker

  • Mortgages

Here are some vital points on the current mortgage market from our expert David Baker.

Mortgage Approvals Rise

In the final month of 2023, the mortgage market witnessed a positive trend with mortgage approvals rising for the third consecutive month; specifically, net mortgage approvals for house purchases increased from 49,300 in November to 50,500 in December. This upward trajectory indicates growing confidence among homebuyers and a potential boost to the real estate sector.

Why is this significant?

  • Economic Recovery: The steady rise in mortgage approvals reflects an improving economic landscape. As pandemic-related uncertainties wane, more individuals are taking steps toward homeownership.
  • Consumer Sentiment: Homebuyers’ confidence in the stability of the housing market is crucial for sustained growth. Increased approvals signal a positive outlook.

Interest Rate Fluctuations

The mortgage interest rate rollercoaster has been quite the ride! Since the summer months, rates have experienced substantial fluctuations. On the plus side, rates have been coming down across the board since the latest peak around July 2023.

Why the volatility?

  • Global Economic Factors: Geopolitical events, inflation concerns, and central bank policies all play a role in interest rate movements.
  • Market Sentiment: Investors react to news and economic indicators, causing rates to shift rapidly.

Market Recovery

After a year of subdued activity, due to pandemic-induced uncertainties, the mortgage market is finally showing signs of recovery. Lending remained relatively flat in the three months leading up to December, with a total of £72.8 billion. However, early indications from January suggest a return to 2019 levels. What’s driving this recovery?

Factors Contributing to the Rebound

  • Pent-Up Demand: Many potential homebuyers postponed their plans during the pandemic. As conditions stabilize, they’re re-entering the market.
  • Lower Interest Rates: Despite fluctuations, rates are generally coming down and clients now mainly comment it is cheaper than they were expecting to pay.
  • Positive Trends: The emergence of positive trends, coupled with lower rates, encourages both buyers and lenders.

 Future Outlook

What lies ahead for the mortgage market? Analysts are cautiously optimistic. Here’s why:

Reasons for Optimism

  • Customer Sentiment: Recent positive trends have boosted consumer confidence. As the recovery gains momentum, more buyers may enter the fray.
  • Interest Rates: Having potentially peaked, rates are now on a downward trajectory. This bodes well for affordability.
  • Bank of England’s Role: The central bank’s decisions impact the market. The hold decision was well-received, and speculation about an earlier-than-expected base rate cut adds to the optimism.

Navigating Volatility

Remember, the mortgage market remains volatile. Seeking solid advice from financial experts is crucial. Whether you’re a prospective homebuyer, or an investor, staying informed is your best strategy.