The value of gross mortgage lending rose to £22.2bn in May, the fourth consecutive month to see an increase, data from the central bank showed.
The Bank of England (BoE) Money and Credit report showed this was up from £21.1bn in April and higher than the six-month average of £18.7bn.
Gross mortgage repayments also rose from £19.3bn to £20.5bn from April to May.
The net borrowing of mortgage debt fell from £2.2bn to £1.2bn month-on-month.
Karen Noye, mortgage expert at Quilter, said the decrease in net mortgage borrowing highlighted the “cautious approach buyers are taking amidst an unpredictable economic outlook and fluctuating mortgage rates”.
The annual growth rate for net mortgage lending increased to 0.3% in May, up from a rise of 0.2% in April. This was also the first annual rise in the growth rate of net mortgage lending since October 2022.
Noye said: “Despite this slight growth, the market’s overall activity remains tepid, reflecting the uncertainty and reluctance among potential buyers.”
Dip in mortgage approvals
Mortgage approvals for house purchases fell slightly from 60,800 in April to 60,000 in May.
Jason Ferrando, founder and CEO of EasyMoney, said buyers were acting “with greater intent”, as approvals sat around the 60,000 for the fourth month running.
He added: “There has been a marginal decline over the last two months and this is largely due to the expectation that an interest rate cut is imminent, with some buyers holding out in hope of lower mortgage rates.
“When such a cut does materialise, it’s likely to spur these buyers to get off the fence and transact, at which point mortgage approval numbers will start to climb once again.”
Jonathan Samuels, CEO of Octane Capital, also saw this as a positive, adding: “Mortgage approval levels may have fallen marginally over the last two months, however, they remain considerably higher than we’ve seen for quite some time, which demonstrate[s] that the sector is continuing to benefit from a far greater degree of stability since the base rate has been held.
“There is no doubt a ‘wait and see’ element at play here as well, with a segment of buyers putting their plans to purchase on temporary hold ahead of the election. So, while mortgage approval levels have remained consistent of late, we expect to see further growth in these numbers as the year progresses.”
The number of approvals for people remortgaging to a new lender also fell slightly from 29,900 in April to 29,600 in May.
Noye said this decline was “reinforcing the overall sluggishness in the market”.
She added: “There is also an increasing trend of homeowners choosing to stick with their current lender when their mortgage deal ends, rather than remortgaging to a new one. Historically, many of these customers would switch to a different lender to secure the best rates.
“However, with average mortgage rates so much higher than what they were used to, many are opting to stay with their current lender through a product transfer to avoid the stringent affordability checks and potential higher costs associated with switching lenders.”
Rise in average interest rates
The interest paid on newly drawn mortgages increased by 0.05% to 4.79% in May, while the rate on the outstanding stock of mortgages also went up by 0.04% to 3.61%.
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