British lenders approved the highest number of mortgages in four months during March, signalling a degree of resilience in the economy despite the onset of the Iran war. Figures released by the Bank of England show mortgage approvals for house purchases climbed to 63,531 in March, up from 62,708 in February. This increase, the highest since November, defied economists’ expectations for a decline, serving as a key indicator for future home sales. Furthermore, net unsecured lending to consumers also grew, rising by 1.895 billion pounds ($2.58 billion) in March. While slightly less than the previous month, this figure surpassed economists’ forecasts of a 1.75 billion pound increase, marking the fastest annual credit growth since January 2024 at 8.9 per cent.
Despite these robust lending figures, the property market presents a mixed picture. Consumer confidence has reportedly softened since the beginning of the Iran war, coupled with the anticipation of higher mortgage rates. This sentiment led property surveyors and mortgage lender Halifax to report a decline in prices and buyer demand throughout March. Conversely, Nationwide Building Society’s data, released earlier, indicated that house prices continued a modest upward trend into April, showing a 3.0 per cent increase compared to the same month in the prior year. Rob Wood, chief UK economist at Pantheon Macroeconomics, has expressed reservations about the sustainability of this trend.
Wood projected that if the Bank of England proceeds with expected borrowing cost increases, the interest rate on a new two-year fixed-rate mortgage at 75 per cent loan-to-value could rise to 4.8 per cent in the coming months, up from the current 4.5 per cent and 3.9 per cent at the start of the year. Consequently, he forecasts house price inflation of just 1.0 per cent in the fourth quarter of 2026. On Thursday, the Bank of England maintained its interest rates at 3.75 per cent. Governor Andrew Bailey acknowledged a range of potential paths for interest rates, influenced by factors such as the closure of the Strait of Hormuz, and indicated he would not oppose market expectations for two quarter-point rate hikes this year.
