Mortgage approvals have bounced back after slumping to a two-year low last month, suggesting the property market was regaining momentum before the Iran war shocked global markets.
The number of approved mortgages for house purchases increased to 62,600 in February, up from the two-year low of 60,200 in January, according to the Bank of England.
The jump in mortgage approvals came before the confidence shock caused to the property market by the Iran war, with the number of deals on offer having shrunk by a fifth since the conflict began.
Despite the increase last month, February’s mortgage approvals rate remains below an average of around 63,500 in the last six months.
Approvals for remortgaging bounced up slightly too, from 38,500 in January to 41,200 in February.
Jonathan Samuels, chief executive of specialist lender Octane Capital, said: “Whilst the Iran conflict has had an impact on mortgage sector confidence to an extent, it’s unlikely to make a lasting dent in domestic sentiment.
“Whilst we may see a momentary dip in approval activity in the next set of figures, the outlook for the year ahead remains wholly positive.”
Iran war spikes mortgage rates
But property experts Knight Frank said this positive data predates the outbreak of war in the Middle East and mortgage rates have since climbed – from 3.5 per cent in February to 4.5 per cent this month.
Simon Gammon, managing partner at the estate agents, said: “While much of the upward pressure reflects the energy shock linked to the conflict, there is also a clear behavioural response, with borrowers rushing to lock in deals before rates move higher.
“This risks overwhelming lenders and prompting further repricing, reinforcing a feedback loop in which urgency on the demand side adds to upward pressure on rates.”
Earlier this month, property developer Berkely said the Iran war was “weighing heavily” on market confidence.
The Bank of England’s data also shows Brits are borrowing more, with net borrowing of consumer credit by individuals up to £1.9bn in February – above the January figure and six-month average of £1.8bn.
Of this borrowing, £800m was on credit cards while £1.2bn was through other forms of consumer credit, such as car dealership finance and personal loans.
The annual growth rate of consumer credit increased to 8.5 per cent in February from 8.3 per cent in January.
Karim Haji, global and UK head of financial services at KPMG, said this suggests households are struggling to make ends meet following heavy spending around Christmas and the new year.
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