Mortgage approvals hit six-month high as falling rates reach another milestone
New data from the Bank of England has revealed that the number of mortgages being approved in the UK reached a six-month high in February. The news comes as analysis by a leading financial company shows that two-year fixed rate mortgage deals have hit another record low.
Experts believe that the housing market may have 'bottomed out' and that increased competition is benefiting borrowers through lower rates.
Mortgage approvals rise in February
The latest data from the Bank of England has revealed that mortgage approvals in the UK are now at their highest level since August 2014. There were 61,760 mortgages approved in February, around a thousand more in January and the highest figure in six months.
It is the third month in a row that approvals have risen and experts now believe the housing market is set for a steady improvement.
“Housing market weakness has bottomed out, and activity is now gradually turning around,” says Howard Archer, chief UK economist with IHS Global Insight.
Average two-year fixed rate hits new record low
One of the reasons that mortgage approvals are rising is because of the superb deals that are currently available. Rates have been falling for several months now and new data from financial analysts Moneyfacts shows that a new milestone has been reached.
At the end of March 2015 the average cost of a two-year fixed-rate mortgage had fallen to 2.98%, the first time on record that it has dipped below the 3% mark.
A combination of strong competition between lenders and falling 'swap rates' – the rates at which financial institutions lend to one another – has resulted in cuts to the cost of borrowing. And, in an environment of low inflation, many experts believe that mortgage deals could continue to fall in price.
Sylvia Waycot, editor of Moneyfacts.co.uk, remarks: “The drop to zero inflation has resulted in the constant speculation of a Bank of England base rate rise being kicked to the kerb for the time being. Removing that concern has made it easier for lenders to drop some rates in order to be more competitive.
“Another happy consequence of zero inflation is that those on a higher loan-to-value become less of a lending risk because the money in their pocket stretches further, making the risk of tipping into mortgage arrears less likely. Lenders normally factor this risk into the overall rate charged, so as the risk has lessened, so has the rate.”
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