UK mortgage approvals climbed as falling borrowing costs are bringing buyers back to the housing market. (Ben Birchall - PA Images via Getty Images)

UK mortgage approvals surged to a six-month high as the average rate fell for the first time since November 2021 as lenders compete for business.

Net mortgage approvals rose to 50,500 in December from 49,300 in November, according to figures from the Bank of England (BoE).

Net approvals for remortgaging increased to 30,800 in December from 25,700 in November.

It comes as the BoE figures showed the “effective” interest rate — the actual interest paid — on newly drawn mortgages fell by six basis points to 5.28% in December. It was the first time the cost of borrowing dropped since November 2021.

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Alice Haine, personal finance analyst at Bestinvest, said: “For now, the better interest rate outlook is already feeding through to the market with new buyers able to secure significantly better mortgage deals than the hyper-expensive products on offer last summer.

“Buyers can take further comfort from January’s heated mortgage price wars as lenders battled to attract new customers and retain existing clients.”

Lenders have engaged in a mortgage price war in which they have cut the costs of new fixed-rate deals to try to remain at the top of the best-deal tables.

Markets expect prices to stabilise in 2024 as financial markets bet on the BoE cutting interest rates from the middle of the year.

Akhil Mair, director at Our Mortgage Broker, believes the official figures will likely show a further jump in approvals in January, given high levels of demand.

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He said: "The surge in mortgage enquiries and subsequent applications since early December has been truly remarkable. There's been a dynamic blend of first-time buyers eagerly stepping onto the ladder and seasoned home movers seeking new horizons.”

Borrowers repaid, on net, £800m worth of mortgage debt in December, compared to net zero in November.

The figures also showed that consumer borrowing came in at £1.2bn in December, declining from the previous month's £2.1bn. The annual consumer credit growth decreased slightly compared to November, landing at 8.5% in December.



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