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Another rise in mortgage approvals to 65,600 in September, the highest level in two years, reinforces our view the housing market is reviving and will continue to improve over the next year. Meanwhile, consumer borrowing seems to have avoided any impact from the drop in consumer confidence in September, although household saving remains elevated meaning spending probably remained subdued in Q3. 

UK housing market recovery in train 

Mortgage approvals are now around the 10-year average of 65,000. Applications rose to about 65,600 in September from a revised figure of around 65,000 the prior month. Overall, approvals are almost 50% higher than the same month in 2023.

All the factors which are contributing to the broader economic recovery are also positive for the housing market. Lower inflation, higher household incomes, lower interest rates and, until recently at least, recovering consumer confidence will all help to drive housing transactions and prices higher. Indeed, the effective interest rate on newly drawn mortgages decreased by 8 basis points, to 4.76% in September. And with house prices still about 2% below the record highs seen in the summer of 2022, there is plenty of room for catch up growth. We’re expecting annual price rises of between 4% and 5% by the end of the year. 

Consumers borrowing holds up 

Meanwhile, consumer credit growth of £1.2bn in September was in line with the previous six-month average and suggests that nervousness around the budget didn’t put consumers off borrowing last month. However, households’ deposits rose by £8.2bn in September, a little above the six-month average, which suggests that the savings rate remained high and consumer spending a little subdued in the run up to the Autumn Budget.

Corporates ramping up finance issuance 

Businesses raised £3.2bn of net finance last month. After a long period of paying down finance, businesses have been raising money again for most of the last six months. Combined with the revival in business confidence this is a strong sign that businesses are looking to invest. Indeed, business investment jumped in Q2 and it is likely to improve over the next year as the economy picks up and interest rates fall. 

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