Mortgage Approvals Rise for First Time in 2025 Amid Interest Rate Stability

The UK mortgage market experienced a revival in May, marking the first increase in approvals since December 2024. According to the Bank of England, net mortgage approvals for house purchases rose by 2,400 to 63,000, exceeding the expected decline to 59,750 as predicted by economists polled by Reuters. Additionally, approvals for remortgaging increased by 6,200 to 41,500, the largest rise since February 2024. The data suggests a recovery in the housing market, despite the reversion to pre-2022 stamp duty thresholds on April 1, which increased costs for many property buyers.

Key Takeaways:

• Net mortgage approvals for house purchases increased by 2,400 to 63,000 in May, marking the first rise since December 2024.
• Approvals for remortgaging rose by 6,200 to 41,500, the largest increase since February 2024.
• The effective interest rate on newly drawn mortgages decreased to 4.47 per cent in May from 4.49 per cent in April, and the lowest since April 2023.
• The rate on the outstanding stock of mortgages increased slightly, to 3.87 per cent, the highest since 2009.
• The market is pricing a 72 per cent probability that the Bank of England will cut interest rates by a quarter-point to 4 per cent at the next meeting on August 7.
• A rate cut could lead to more people buying property, potentially boosting the economy.
• Net borrowing by individuals decreased to £859mn in May, the lowest since April 2024.

Statistics:

• Net mortgage approvals for house purchases: 63,000 (May 2025)
• Approvals for remortgaging: 41,500 (May 2025)
• Effective interest rate on newly drawn mortgages: 4.47 per cent (May 2025)
• Rate on the outstanding stock of mortgages: 3.87 per cent (May 2025)
• Probability of Bank of England rate cut: 72 per cent (August 2025)
• Net borrowing by individuals: £859mn (May 2025)

Sources:

• Bank of England
• Reuters
• Alexander Hall
• Online Mortgage Advisor
• Capital Economics