Mortgage approvals are increasing, but recovery could be slow

According to statistics from the Bank of England, mortgage approvals in the UK increased more than anticipated in October, indicating a potential slowdown in the housing crisis.

Net mortgage approvals for home purchases increased to 47,400 in October from 43,700 in September, according to statistics released on Thursday. This figure is around 28% lower than the October 2019 level but above the 45,000 predicted by experts.

Remortgaging net approvals also climbed, rising from 20,600 in September to 23,700 in October.

With freshly issued mortgages, the "effective" interest rate—the real interest paid—saw a rise of 24 basis points to 5.25%.

The increase in mortgage approvals in October, according to Capital Economics, indicates that the mortgage approval slump is behind us as mortgage rates have begun to ease.

However, they believe that mortgage demand would likely remain sluggish by usual standards because mortgage rates are unlikely to drop significantly below 5% until H2 2024.

Mortgage rates are expected to remain at 5% until the second half of 2024, according to capital economics projections. This means that there isn't going to be much of a rebound from current levels, with approvals only reaching 600,000 in 2024—far from reaching their pre-pandemic average of about 800,000.

(Sources: investing.com, proactiveinvestors.co.uk)