Mortgage approvals have risen to their highest level since February 2016, data published by the Bank of England on Monday showed.
The central bank said there were 70,888 mortgage approvals for house purchase in January, a 4.4% improvement on December’s figure and the highest for 47 months. It was also comfortably above analyst expectations for around 68,000.
Remortgage rates also grew, by 3.9% to 52,100.
Net mortgage borrowing by households, which lags approvals, was £4.0bn, slightly below the £4.3bn six-month average. The annual growth rate for mortgage borrowing remained at 3.4%.
Howard Archer, chief economic advisor to the EY Item Club, said: “The data very much fuels the view that the housing market is currently benefiting markedly from increased confidence and reduced uncertainties following December’s general election.
“A stream of recent data and surveys suggest that the housing market has shifted up a gear after a lacklustre 2019, with particular softness around the third quarter.
“Certainly there is compelling evidence that the housing market has benefited from increased optimism and reduced uncertainties following December’s decisive general election, as well as a greater near-term clarity on Brexit.
“We had been expecting the housing market to continue to benefit in the near term from reduced uncertainties, but it is possible that concerns and uncertainties over the coronavirus outbreak could have an impact.
“We currently expect house prices to 3% over 2020.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The effective interest rate on all new mortgages dropped to 1.85%, from 1.88% in December, remaining well below the effective rate on the outstanding stock. As a result, the refinancing tailwind to growth in household’s disposable incomes remains on track to strengthen modestly this year. Lower mortgage rates also have underpinned the recover in house purchase mortgage approvals in January.”
The Bank also reported on Monday that the annual growth rate of consumer credit – defined as credit used by consumers to buy goods and services – remained at 6.1% in January. That represented growth of £1.2bn, above both the average seen over the last six months and the consensus, both of which were £1.0bn. The Bank said the rate was “stabilising after the downward trend seen over past three years”.
By Abigail Townsend