Net mortgage approvals for house purchases in the UK increased in May compared to April, to 50,500 from 49,000 respectively, the Bank of England (BoE) has revealed.

Data from the BoE’s Money and Credit May 2023 report also shows that the number of approvals for remortgaging rose from 32,500 to 33,600 during the same period.

Further data also states that net borrowing on consumer credit by individuals decreased form £1.5bn in April to £1.1bn in May.

Chairman of Air Academy, Stuart Wilson, said: “As net mortgage approvals rise slightly from 48,900 in April to 50,500 in May, the market has proved its remarkable resilience against the challenging headwinds it currently faces. Given the slight backlog of completions, this may have bolstered some of the figures so the real test will be the updates in June and July as the impact of successive rate changes becomes more evident.

“That said, the Government is still aiming to halve inflation this year and the recent package of support announced to help those struggling with mortgage payments will no doubt boost confidence. However, as ever with the UK housing market, we must temper our interpretation of current market behaviour with a longer-term and arguably more customer-centric view.

“Having seen historically low rates over the last few years, we are heading back into a higher interest rate environment – at least for the time being. While the Government measures will go some way to help, eventually people will need to either repay or manage their mortgage borrowing through other means.”

Chief executive officer at loan.co.uk, Paul McGerrigan, added: “Despite rocketing interest rates the mortgage market continues to show resilience with remortgage approvals increasing from 32,500 to 33,600 and approvals for house purchases rising from 49,000 to 50,500.

“Interest rates are at a level now where few buyers want to be locked in, so only the most determined, or those spotting bargains, are still active, but there are enough to see activity increase.

“Mortgage products have been reducing for the past few weeks, leaving those needing a new deal with diminished choice. Whilst a challenging time for the market, Advisers on the front foot with access to the widest array of products, will be able to best placed to serve their clients.”

However, households, on net, withdrew £4.6bn from banks and building societies, marking the highest level of household withdrawals on record (for this monthly series, which started in October 1997).

The BoE also stated that within the household deposits measure, net withdrawals of interest-bearing sight deposits increased significantly from £5.4bn in April to £11.4bn in May. Non-interest bearing sight deposits marked the seventh consecutive month of net withdrawals at
£3.3bn in this month.

Furthermore, the combined net flow of both household deposits with banks and building societies and national savings and investment accounts amounted to -£3.8bn in May, compared to £5.3bn in April.

Tink’s UK and IE banking director, Tasha Chouhan, said: “Today’s Money & Credit statistics from the BoE reveal that UK household deposits in savings fell by £4.6bn in May as customers likely used savings to stretch their finances and cover rising costs. Through challenging economic periods such as these, customers will likely look towards their banks for support.

"This was supported by our research which estimates around 25 million consumers in the UK are only just managing their finances, which means they can pay for their essentials, but may still need their bank’s support to help them maintain financial stability. In fact, our research shows nearly a third of these consumers (27%) have already been forced to use their savings because of the rising cost of living.

“By implementing open banking tools, such as automatic budgeting and savings insights, banks can give customers the nudge they need to start tracking their spending. Using money management tools and making small changes, such as cancelling a subscription which is similar to another, or budgeting suggestions can go a long way towards helping customers stretch finances further without having to dip into their savings.”

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