Residential mortgage approvals increased to 58,200 in June, from 56,600 in May, but remain below the average of around 61,400 over the previous six months, the latest Bank of England data shows.
Approvals for remortgaging with a different lender also increased to 34,200 in June, from 33,800 in May.
This is despite the average interest rate on newly drawn mortgages increasing to 4.35% in June, from 4.22% in May. The rate on the outstanding stock of mortgages was 3.96% in June, up from 3.92% in May.
The figures also show that net mortgage borrowing more than doubled to £7.7 billion in June, from £3.3 billion in May, and above the previous six month average of £4.9 billion.
Gross lending increased slightly to £27.4bn in June, up from £27.2n in May, above the six month average of £26.0bn.
Mark Harris, chief executive of mortgage broker SPF Private Clients, commented: “Mortgage approvals rose in June although they remain below the six-month average, illustrating the concerns and difficulties facing buyers.
“The effective interest rate paid on new mortgages jumped again to 4.35% while the rate on the outstanding stock of mortgages rose to 3.96%. On the ground, mortgage rates have risen back to the same level seen a month ago amid renewed tensions in the Middle East. Borrowers who will need a mortgage in coming months may want to consider securing a product sooner rather than later in case rates rise further in the short term.
“Remortgaging numbers picked up slightly, suggesting that borrowers may be shopping around for better rates rather than sticking with their existing lender when their current deal comes to an end.”
Nathan Emerson, CEO at Propertymark, said: “The increase in net mortgage approvals for house purchases increased June suggests that buyers responded positively to a period of relative economic stability. However, approvals remained below the average recorded over the previous six months, indicating that while confidence may be improving, activity has yet to fully recover.
“A consistent Bank of England base rate, competitive mortgage products, easing inflation and a temporary reduction in geopolitical tensions are all likely to have supported buyer confidence during the month.
“As inflation continues to ease, households should benefit from greater financial certainty, making it easier for many prospective buyers to plan ahead, build savings for a deposit and take advantage of more competitive borrowing costs.
“However, there remain headwinds. Inflation is still above the Bank of England’s 2 per cent target ahead of this Thursday’s interest rate decision, while higher household costs, including increased energy prices from 1 July, continue to place pressure on household finances.
“Ongoing uncertainty in the Middle East also has the potential to affect global energy markets and inflationary pressures, meaning affordability will remain a key challenge for many aspiring homeowners.”
Richard Pike, sales and marketing director at Phoebus Software, added: "May's 15% drop in approvals followed a sharp spike in April as buyers rushed to lock in rates, so some correction was always likely. June's figures are a mixed picture rather than a clean return to normality - approvals of 58,200 are up only modestly on May and still below the six-month average of 61,400, while net borrowing jumped to £7.7 billion, more than double May's £3.3 billion.
“That jump points to April's approvals working through to completion, and to the ongoing wave of fixed rate maturities feeding through into gross lending, rather than any fresh surge in new buyer demand.
"A big part of this is the refinancing wave finally landing - borrowers coming off five-year fixes taken out when rates were near record lows are now rolling onto pricing that can be several percentage points higher, and for many that's a genuine payment shock. Lenders and their servicing systems need to be ready to support these customers proactively, not just process the switch.
"The underlying story is still that swap rates remain volatile, driven by the escalating US-Iran conflict, and consumer confidence stays fragile. Approvals - the better guide to what's coming next - simply aren't showing the same strength as the net borrowing headline.
"Lenders have been repricing upward in recent weeks, and the impact of that, along with any post-MPC repricing, will show up more clearly over the next few months.”
