UK mortgage approvals rose to more than two-year high before Budget

UK lenders approved the most mortgages in more than two years last month as Britain’s housing market proved resilient ahead of the new government’s first Budget.

Banks and building societies gave the green light to 68,300 loans for house purchase in October, according to data from the Bank of England.

That figure is the highest since August 2022 and up from 66,115 approvals in September. Economists had expected approvals to drop to around 64,500.

Friday’s number marks the fifth straight monthly increase, suggesting a sustained recovery in longer-term borrowing.

Brokers were bracing for a rebound in mortgage activity after the BoE started lowering interest rates in August, although fears over tax rises in the Budget on 30 October dented confidence.

Chancellor Rachel Reeves raised taxes by £41bn and unveiled £142bn of extra borrowing, which led traders to pare their bets on monetary policy easing. Analysts have warned that higher-for-longer interest rates and inflation could dampen mortgage activity.

“While this latest data paints a buoyant picture of the housing market, the ripple effects of the Budget and the corresponding hikes on fixed rate mortgage prices could dampen the outlook,” said Karim Haji, global head of financial services at KPMG.

Elsewhere, the BoE’s numbers showed consumer credit growth slowed slightly in October. Annual consumer credit growth slowed to 7.3 per cent in October from 7.5 per cent the month before.

Data from the British Retail Consortium published on Thursday showed consumer confidence in the health of the economy dipped in November following the Budget.

“October’s dip in consumer borrowing, combined with falling consumer confidence, points to worsening sentiment ahead of the Budget, as some borrowers paused their credit plans to see what impact it would have on their finances,” Haji added.

Thomas Pugh, an economist at consultancy RSM, said weakness in consumer borrowing coupled with higher levels of saving “raises the risk that consumer spending remains subdued in the fourth quarter and economic growth underwhelms again”.