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Bank of England statistics graph showing the increase in endorsed mortgage applications from May to June 2023.

Bank of England statistics show a rise in endorsed mortgage applications

Fresh data released by the Bank of England has unveiled an upswing in net approvals for mortgage applications related to house purchases. The numbers indicate an increase from 51,100 in May to 54,700 in June. Concurrently, approvals for remortgaging also experienced growth, rising from 34,100 to 39,100 during the same period.

This trend follows the information revealed in June, which highlighted a drop in mortgage approvals for April, followed by a rise in the subsequent month. Net borrowing of mortgage debt by individuals showed a shift from net repayments of £0.1 billion in May to a net increase of £0.1 billion in June. Notably, there were record high net repayments of £1.1 billion in April when excluding the period since the start of the Covid-19 pandemic.

The “effective” interest rate, which represents the actual interest paid on newly acquired mortgages, continued to exhibit consistent growth. In June, it increased by an additional 7 basis points, reaching 4.63%. Furthermore, gross lending demonstrated a consecutive second-month increase, rising from £19.0 billion in May to £20.0 billion in June. Similarly, gross repayments also saw a rise from £19.0 billion in May to £19.8 billion in June.

Adam Oldfield, the Chief Revenue Officer at Phoebus Software, offered insights into the data, highlighting two distinct narratives. One underscores the persistent appetite for property acquisition, despite skepticism. The other narrative suggests that consumers are increasingly relying on credit due to the escalating cost of living.

On Consumer Duty Day, a day focusing on financial services scrutiny, the level of consumer borrowing emerges as a substantial indicator that consumers seek to distribute their spending costs. This presents an opportunity for the industry to demonstrate a commitment to clients’ best interests. For lenders, this moment underscores the importance of establishing the right systems and personnel to ensure that the Consumer Duty remains a primary consideration moving forward.

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