Interest rates cut hopes rise as Bank of England says mortgage approvals steady

The Bank of England has reported that the number of mortgage approvals for home buyers remained "broadly stable" in June, with 59,976 mortgages for house purchase approved, compared to 60,134 in May.

The Bank's Money and Credit report stated: "Net mortgage approvals (that is, approvals net of cancellations) for house purchases, which is an indicator of future borrowing, remained broadly stable at 60,000 in June."

Since August last year, the base rate has stayed at 5.25 percent.

However, with inflation hitting the two percent target level for the past two months, there are hopes that interest rates can start to be reduced, possibly as early as Thursday, easing the pressure on borrowers.

Lucian Cook, head of residential research at estate agent Savills, commented: "June's mortgage approvals provide further evidence that the general election had relatively little impact on home buyer sentiment, and that a pick-up in activity will depend more on what happens to Bank base rate in coming months. ".

Jason Tebb, president of website OnTheMarket, noted: "Stable mortgage approvals, which indicate the future direction of travel of the market, suggest that buyer and seller confidence remain consistent despite recent political changes."

Nathan Emerson, chief executive of property professionals' body Propertymark, said: "Today's figures show that the General Election did not damage people's confidence in borrowing money to purchase their next home in the way many may have anticipated."

Simon Gammon, managing partner at Knight Frank Finance, has shed light on the current state of the mortgage market: "Mortgage approvals continue to hover in the 60,000 range, down from about 66,000-a-month before the pandemic."

He also highlighted the ongoing struggle against inflation, noting: "Repeated false dawns in the battle against inflation have left the property market stuck in first gear, but it's now very likely that we'll have a busier second half of the year."

Gammon pointed out the fierce competition among lenders: "The lenders have cut margins to the bone in the battle for market share, and this pattern should continue as the Bank of England offers some relief in the form of reductions to the base rate."

He expressed optimism about the potential impact of the Bank of England's actions: "The first Bank of England rate cut, whether it arrives on Thursday or perhaps in September, will provide a big boost to sentiment, which has improved for several months already."

The report also indicated a cautious approach by households towards non-mortgage borrowing, opting instead to bolster their savings.

It was noted that the annual growth rate for consumer credit, encompassing credit cards, personal loans, and overdrafts, decelerated to 8.0 percent in June, down from 8.4 percent in May.

Specifically, the growth rate for credit card borrowing decreased to 10.5 percent in June, a slight drop from 10.8 percent in May.

In terms of savings, household deposits with banks and building societies experienced an increase of £8.4 billion in June.

This surge was partly due to households adding an extra £3.4 billion into Individual Savings Accounts (Isas).

Furthermore, private non-financial corporations (PNFCs) raised a net sum of £6.7 billion of finance in June, marking an uptick from £4.2 billion in May.

Karim Haji, the big boss for financial services in the UK and globally at KPMG, commented: "The slight dip in consumer borrowing in June reflects the fact that the more positive economic outlook with growth forecasts being revised upwards is yet to be felt by consumers."

He warned that although we're seeing some good signals from the economy, it's uncertain if this good spell is here to stay or if trouble is brewing.

Haji pointed out a glaring issue: "Despite these positive economic indicators, it remains to be seen whether a turnaround will be sustained or if challenges are on the horizon."

He highlighted a key concern for ordinary folks when he said, "What is clear is that despite two straight months of inflation remaining on-target, households aren't necessarily feeling better off for it indeed, wage growth has slowed in recent months, which may go some way to explaining this."

Concerning credit, he mentioned, "Borrowers may well be awaiting movement on the Bank of England's base rate before deciding to take out more credit although the recent fall in mortgage rates may lead to increasing confidence and appetite."

Haji also considered the timing of the data, noting, "Similarly, these latest figures were taken whilst we were in the thick of the General Election campaign, with many borrowers perhaps waiting until a clearer sense of the incoming Government's fiscal policy emerged."

On the flip side of borrowing, Alice Haine, an expert on personal finances from Bestinvest by Evelyn Partners (sounds like they know their stuff about online investing), threw in her tuppence: "Hunting out the best deal while you can is vital."