Mortgage approvals in the UK increased to their highest level since October 2022 in June as buyers raced to secure home loan deals before an expected surge in interest rates.

According to data released by the Bank of England yesterday, there was a surprise rise in demand for mortgages, with an increase from 51,100 in May to 54,700 in June.

The Bank said there had also been an increase in remortgaging activity – which rose by 5,000 to 39,100 between May and June.

Despite June’s hike, mortgage approvals were still down by 15% year-on-year – and analysts said June’s pickup in demand was unlikely to be sustained.

Industry reactions: 

Thomas Pugh, economist at RSM UK, said: “The rise in mortgage approvals probably represents a scramble to secure a deal before cheaper mortgage products were pulled from the market in the wake of the surge in interest rate expectations at the end of May.

“With interest rates on mortgages continuing to rise, the average two-year fixed-rate mortgage deal broke above 6% in June, we expect the peak in house prices to fall by around 10% with the risk of bigger falls if the base rate rises above 6%.”

Conor Murphy, CEO and founder, Smartr365 and Capricorn Financial Consultancy, commented: “The sun continues to shine on the UK property market, with activity holding up in the face of the wider economic slowdown. The summer months are typically busier due to the weather improving property photography and making moving easier, while also allowing families to move between school terms.

“Besides the weather, activity is also buoyed by stabilising house price inflation, and competitive pricing from lenders. Widespread tech integration will be key to capitalising on this strong demand. Comprehensive, end-to-end systems, which can house a range of tech tools, are key to streamlining time-intensive admin tasks, giving advisers more time to make the most of this bright spell.”

Simon Gammon, a managing partner at Knight Frank Finance, said: “June’s figures showed strong remortgaging activity and we’d expect another rise in July. Whereas in June, borrowers were scrambling to fix on fears that mortgage rates could rise further, July’s activity will be driven by a surge in demand for tracker products. Many more borrowers are now opting for trackers, betting that rates will keep easing and they will have the opportunity to fix at more attractive rates in a few months.”

Steve Seal, CEO, Bluestone Mortgages, said: “While it’s positive to see a slight uptick in the number of mortgage approvals, worse could be yet to come. We are still facing strong economic headwinds, and as lenders continue to increase rates and pull deals, affordability will remain a key challenge for would-be and existing borrowers.

“For those who are concerned about the current environment and how it will impact their homeownership goals, now more than ever is the time to seek advice from a mortgage broker. These professionals are here to support existing and potential borrowers and will be able to signpost them to the best available options tailored to their personal circumstances. While the outlook may appear to be gloomy, it is our industry’s duty to remind people that the homeownership dream can still live on.”

Adam Oldfield, chief revenue officer at Phoebus Software, commented: “The figures from the Bank of England tell two distinct stories. One that shows that no matter what the naysayers believe there is still an appetite to purchase property. The other story is perhaps what we have been expecting to see, that consumers are starting to rely more on credit as the rising cost of living bites.

“On this Consumer Duty Day, when all financial services come under the spotlight, this level of consumer borrowing is the biggest indication to date that consumers are looking to spread the cost of their spending. It is an opportunity for everyone in our industry to show that everything we do is with our clients’ very best interests at heart. For lenders especially, this is a time to ensure that all the right systems and people are in place to ensure Consumer Duty is at the forefront of everything they do going forward.”

Terry Woodley, MD of Development Finance at Shawbrook, said: “Though June shows a further rise in approvals, this is typical of the summer season and doesn’t paint the full picture. Developers remain concerned about a market slowdown in the face of interest rate rises and economic pressures.

“Developers will be looking to complete work on current properties as soon as possible to mitigate the impact fluctuating rates have on buyer confidence. Retrofitting and renovations continue to be at the forefront of developers’ plans, especially to cater for a rental market currently being starved of quality, affordable stock. Developers will need to revisit their strategy and adapt. This could mean looking at new locations and property types or focusing more on segments such as the houses in multiple occupation (HMO) sector.”

Andrew Wishart, senior property analyst at Capital Economics, said: “It takes two to three months for developments in quoted mortgage rates to feed through to housing market activity. So, the tick up in mortgage approvals for house purchase reflects that mortgage rates were still coming down in April. Since then, our measure of the average quoted mortgage rate has risen from 4.3% to over 5.5%. We won’t see the full impact of that increase until we get the mortgage approvals data for September at the end of October.”