Mortgage approvals are up. Does this mean the housing market is finally recovering?

The number of mortgage approvals ticked up in October, new data has revealed, as mortgage rates gradually begin to slide.

Mortgage approvals on new homes rose from 43,700 in September to 47,400 in October, according to the latest figures from the Bank of England. Net approvals for remortgaging also increased from 20,600 in September to 23,700 in October.

It comes after the Bank held interest rates for a second time in a row following a surprise drop in inflation to 4.6 per cent, leading a number of high street lenders to offer cheaper mortgage deals.

The average 2-year fixed mortgage rate is now 5.56 per cent, down from 5.77 per cent a year ago, while the average 5-year fixed mortgage rate is now 5.14 per cent, down from 5.52 per cent a year ago, according to new figures from Rightmove.

But the number of approvals in September represented the lowest level since January, while approvals for remortgaging in September fell to the lowest level since January 1999.

So, is the housing market finally rebounding or is this just a blip?

Myron Jobson, senior personal finance analyst at Interactive Investor, said that the increase in mortgage approvals shows there remains a “healthy appetite” among buyers to get sales done despite the “well documented affordability pressures”. 

“Rates remain high but are seemingly palatable enough for many homeowners to lock into a new deal rather than pay the more expensive standard variable rate,” he said.

But, he added: “Rates need to fall even more, perhaps closer to four per cent, to bring more confidence back to the market.”

Hina Bhudia, partner at Knight Frank finance, said that while mortgage lending for house purchases improved in October it is “still running well below the long run average.”

“Mortgage rates continue to ease following several positive sets of inflation figures, which has coaxed a lot of previously hesitant borrowers into making decisions,” she said, but rates “are still far higher than the sub-2 per cent rates most people are used to.”

This, she said, will “continue to incentivise homeowners to sit tight rather than move.” And while she expects remortgaging and purchasing figures to “improve over the next few months,” lending for purchasing “will only recover to a point, because the stock of homes for sale remains well below long run averages.”