Gross lending rose to £26.5bn in March from £26bn in February, while gross repayments dropped to £19.7bn down £1.3bn from February, the Bank of England’s March Money and Credit report shows.

Approvals for residential property purchases changed marginally from 70,968 in February to 70,691 in March. This remains above the 12-month pre-pandemic average up to February 2020 of 66,700.

Approvals for remortgaging – the data is based solely on remortgaging with a different lender – were at their highest since the 52,100 approvals made in February 2020. March approvals increased slightly to 48,764, remaining below the 12-month pre-pandemic average of 49,500.

In addition, the figures reveal that the interest rate on newly drawn mortgages in March rose by 14 basis points to 1.73%, while the rate on the outstanding stock of mortgages rose two basis points to 2.04% since February.

March saw the steepest spike in net lending, as continually increasing house prices drove up mortgage borrowing to £7bn, up from £4.6bn in February.

By comparison, in the first quarter of 2019, prior to the Covid-19 pandemic, the value of gross mortgage advances was around £63.3bn.

Industry reaction: 

Lawrence Bowles, director of research at Savills:

“The average value of a mortgage grew to £237,021 in March, according to data published by the Bank of England today. This is the highest this value has ever been, and is 2.1% higher than in February and 13.6% higher than the same month last year.

“This means that banks approved almost the same value (-2.3%) of mortgage loans this March as they did last year, amid the stamp duty holiday. Despite the number of mortgage approvals fell -14.0% year on year.

“Latest Savills research found that nine in ten aspiring home buyers say that the continued shortage of stock available to buy is inhibiting their ability to move. As a result, buyers are having to hold steady on budgets. 4 in 5 buyers [80%] surveyed said that the three consecutive increases on interest rates over the last couple of months has had no impact on their budget. At the same time, almost three quarters [74%] also said that the rising cost of living has had no impact on their budget.

“Additionally, the market anticipates an increase in the base rate this week, which has driven most lenders to increase their interest rates. The imbalance we’re seeing between the supply and demand for homes to buy may be due, in part, to a rush to secure a mortgage before we see interest rates rise further.

“The average 2-year fixed rate at 75% loan-to-value was 2.11% in March this year, up from 1.56% a year before. That means a 6.7% increase in monthly mortgage bills, from £960 to £1,025, for someone borrowing today’s average mortgage amount over a 25-year term.”

Jason Tebb, chief executive officer at OnTheMarket:

“Net borrowing of mortgage debt by individuals rose in March, while mortgage approvals, an indicator of future borrowing, were little changed on the previous month and remain above the 12-month pre-pandemic average. This suggests that positive buyer sentiment is holding despite several headwinds, including the rising cost-of-living and the potential for further interest rate rises.

“This confidence is fuelling the housing market. The number of properties newly listed for sale is slowly increasing and supply/demand economics suggest that if this continues, price growth will moderate. For now, there are people who need to move and are determined to get on with it.”

Simon Gammon, managing Partner, Knight Frank Finance:

“Demand on the purchase side remains strong but we are just beginning to see some subtle signs of slowing. Rising mortgage rates and uncertainty over the economic outlook is clearly taking a toll on sentiment and we expect mortgage approvals to fall in the months ahead before settling at longer term norms.

“A boom in remortgaging is underway as borrowers clamour to lock in fixed deals before rates rise even further. The Bank of England remortgaging data only captures deals when borrowers stay with their currently lender so undershoots the ground swell of activity underway.

“Another hike in the base rate is overwhelmingly likely tomorrow. If the Bank of England indicates that it’s likely to take a more aggressive approach to combat inflation we’d expect to see an immediate impact in the mortgage market. Lenders are already repricing products on a weekly basis so borrowers have got to move quickly if they want to secure a good rate – this isn’t something you can put off until tomorrow.”

Jeremy Leaf, north London estate agents:

“Market talk recently has been all about the impact on house prices of recent increases in interest rates and the cost of living. However, in many ways the mortgage numbers can be a more useful indicator of future market health.

“This latest report from the Bank of England is no exception and shows that although approvals are still comfortably above pre-Covid levels they are not rising as quickly as we might have expected in the particularly strong spring season.”

Marc von Grundherr, director of Benham and Reeves:

“Many lenders are now acting with a far greater degree of caution and for prospective buyers this means fewer product options at higher rates.”

“This has inevitably reduced the number of buyers being approved for a mortgage, although those that have are still able to take advantage of a relatively affordable cost of borrowing.

“Of course, while current mortgage rates still remain fairly favourable, we expect that they will continue to climb throughout the remainder of the year. So those considering a purchase would be best advised to act now as they may well find the offer presently on the table won’t be there in a month or two.”

Mark Harris, chief executive of mortgage broker SPF Private Clients:

“The Bank of England records a pick-up in net borrowing of mortgage debt in March, while mortgage approvals were little changed and remain above the 12-month pre-pandemic average. This suggests that the froth has come out of the market, leaving a calmer, more measured, and ultimately more sustainable version.

“With the markets expecting another interest rate rise this month, brokers are being kept busy. Borrowers are increasingly concerned about rising mortgage rates and are keen to secure a fixed rate in particular before they rise further. With lenders pulling some deals with little or no notice, decisions have to be made quickly.”

John Phillips, national operations director at Just Mortgages:

“Outside of the stamp duty inflated peaks, March saw the highest spike in net lending as continually increasing house prices drove up mortgage borrowing.

“While approvals remain steady, the spike in net borrowing shows consumers are looking to borrow more than ever. Competition for houses is still driving up prices, and with more sellers than buyers this looks set to continue.

“With the Chancellor warning that there may be seven more base rate rises before the end of the year, taking it to 2.5%, advice from brokers has never been more critical. The ‘effective’ interest rate rose in March and with the ongoing cost of living crisis, borrowers will be looking for advice on how to achieve long-term security in household expenses.

“Anecdotal feedback from our network of brokers reveals a push towards fixing rates for longer in the hope that the financial landscape will be less turbulent in a few years.”

Jonathan Samuels, CEO of Octane Capital:

“While overall property market sentiment remains very good, a dip in the level of mortgages being approved was always likely to follow such a sustained period of heightened market activity.

This has been largely due to lenders tightening their belts following a number of consecutive base rate increases and we’re now starting to see this more cautious approach to lending start to materialise within topline market statistics.

With the cost of living also putting pressure on many households, this slow but steady decline in buyer activity is a trend we expect to see maintained throughout the remainder of the year.”