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Approvals for home purchases rose to a nine-month high in September as borrowing costs continued to decline and buyers shrugged off concerns about a potential property tax overhaul.
About 65,940 mortgages for home purchases were approved in September, nearly 1,000 more than in August.
It comes as the “effective” interest rate, referring to the actual interest paid on new mortgages, fell to 4.19% in September – the lowest level since the beginning of January.
The level of mortgage lending also rose by 3.2% last month – the fastest rate since the start of 2023, according to new data from the Bank of England.
The total amount of mortgage loans borrowed by individuals reached a net £5.5 billion in September, the highest since March.
Borrowings surged in March as home buyers rushed to take advantage of stamp duty exemptions ahead of a deadline in early April.
But the latest data points to resilience in the housing market, with buyer activity continuing to increase.
Still, the report showed there were about 600 fewer remortgage approvals during September. Figures only reflect remortgage with a different lender.
Furthermore, the total amount of consumer credit borrowed by individuals fell to £1.5 billion in September from £1.7 billion in August.
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Sarah Coles, Head of Personal Finance Hargreaves LansdowneSaid that “six months of falling mortgage rates have played a significant role in the increase in approvals”.
But he also said there were many optimistic buyers who were “playing the waiting game”.
“Potential movers are still worried about what will happen in the future, as the jobs market continues to weaken further, and Budget Looms,” he said.
“There is increasing speculation about this,” said Alice Hahn, personal finance analyst at BestInvest by Evelyn Partners. chancellor Rachel Reeves It will target property tax in its autumn budget on 26 November.
“The housing market has been under pressure following the end of the stamp duty tax break in the spring, which saw thresholds return to their previous low levels – increasing purchase costs for buyers.
“With fears rising that the Chancellor may introduce further property tax reform, the market is floundering as buyers and sellers are holding off on plans to move forward and waiting to see what happens.”
He pointed to some estate agents reporting a decline in buyer demand and even abandoning sales in some cases.
However, Elliot Jordan-Doch, senior UK economist at Pantheon Macroeconomics, said the latest debt data showed “there are some signs of pre-budget concerns coming into action” as “consumers and businesses appear confident”.
“We still think the risks to the housing market remain to the downside for the rest of this year as buyers take a wait-and-see approach to the Budget,” he said.
“But solid mortgage approval numbers indicate that fundamental demand remains strong despite the pessimism shown in housing market surveys, so home prices should continue to rise over the next few months, albeit slowly.”