Average new mortgage rate falls for first time since 2021

The impacts of high interest rates may be easing, according to the latest figures from the Bank of England.

The number of new mortgages approved in December reached a level not seen in seven months, the Bank’s money and credit data showed.

Last month 50,500 new mortgages were approved, a number not seen since May last year, the central bank’s figures showed.

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At the same time, the average interest rate for new mortgages dropped for the first time since November 2021,
falling by 0.06 percentage points to 5.28%.

However, a fall of £830m in net mortgage lending was also recorded, far below the £250m rise expected by economists polled by Reuters.

House-buying activity had been depressed as mortgages grew more expensive following 14 consecutive interest rate hikes by the Bank.

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This had meant houses were becoming cheaper.

The continuous Bank rate rises brought the rate to 5.25% in August, a high not seen since 2008 and a position that has been held in subsequent interest rate decisions by the regulator.

Tuesday’s data also showed a growth in the number of people remortgaging – up to 30,800 in December from 25,700 in November.

The trend of increased approvals may be likely to continue as the average mortgage rate on offer for a five-year fixed deal has dropped to 5.18% and 5.56% for the typical two-year fixed product, according to financial information company Moneyfacts.

Some high street lenders, including the UK’s largest building society, dropped a number of the mortgage rates on offer this month.

Latest inflation and growth forecasts will be published by the Bank’s rate-setting committee on Thursday along with its outlook for future rate decisions.