Britain saw mortgage approvals pick up in February after hitting a two-year low in January, signaling a brief recovery in the property market before global uncertainty over the Iran conflict hit confidence.
According to the Bank of England, mortgages approved for home purchases rose to 62,600 in February, from 60,200 the previous month. Although this represents an improvement, the figure is slightly below the six-month average of about 63,500.
Remortgage activity also picked up, rising from 38,500 in January to 41,200 in February, reflecting a modest resurgence in lending despite widespread market disruption.
Richard Merrett, managing director of Alexander Hall, commented: “The current picture remains encouraging, especially when you compare current market conditions to a year ago. Rates are lower, affordability has improved, and the average buyer is now in a much better position when it comes to mortgage repayment costs.”
Jonathan Samuels, CEO of specialist lender Octane Capital, said: “Where mortgage market activity is concerned, we have seen a strong start to the year, with approvals once again picking up and rates being stronger than anticipated.
“This improved buyer sentiment is being driven by a mortgage landscape that is far more favorable to home buyers than a year ago and this remains the case despite developments in the Middle East in recent weeks.
“While the Iran conflict has had some impact on mortgage sector confidence, it is unlikely to have a lasting impact on domestic sentiment and, while we may see a momentary decline in approval activity in the next set of data, the outlook for the year ahead remains overall positive.”
Simon Gammon, managing partner of Knight Frank Finance, said: “Mortgage lending remained relatively resilient during February, although the data predates the surge in the Middle East. Since then, borrowing costs have risen sharply, which will start to weigh on activity in the coming months. The cheapest fixed rates are now around 4.5%, up from around 3.5% in February, with further revaluations still underway. It is increasingly plausible that leading fixed rates will remain at 5%. Near term prices remain stable, representing a significant pressure on borrowers.
“While much of the upward pressure reflects the energy shock associated with the conflict, there is also a clear behavioral response, in which borrowers rush to make deals before rates rise. This risks pressurizing lenders and inducing further revaluations, reinforcing a feedback loop in which urgency on the demand side exerts upward pressure on rates.”