Mortgage approvals increased by over 3% from 49,000 in April to 50,500 in May, the latest Bank of England money and credit statistics show.
This comes despite the average rate on new mortgages increasing by 10 basis points to 4.56%.
Even with rises in interest rates and inflation, approvals for remortgaging also rose from 32,500 to 33,600 during the same period – an increase of 3.38%.
Meanwhile, the stats show that individuals repaid, on net, £0.1bn of mortgage debt in May.
This followed the record £1.5bn net repayments in April (if the period since the onset of the Covid-19 pandemic is excluded).
Bluestone Mortgages chief executive Steve Seal says: “While today’s figures show an uptick in mortgage approvals, this does not take into account the Bank of England’s recent 0.5% rate rise in its bid to ease inflation.
“However, as inflation continues at higher-than-expected levels, so too will the financial pain for those looking to take their first or next steps onto the property ladder.
“With the average two-year fix now above 6% and the cost of living likely to remain high for the foreseeable future, affordability is the key challenge facing consumers.”
He urged anyone struggling to keep up with mortgage repayments or worried about how to step onto or up the property ladder to seek guidance.
SPF Private Clients chief executive Mark Harris says: “Although mortgage approvals ticked up again in May, buyers are concerned as to what’s going on in the wider economy and what they can afford.
“The worst of the pain may not be over with further rate rises possible as inflation proves to be more stubborn than the Bank of England previously forecast.
Swap rates, which underpin the pricing of fixed-rate mortgages, are still edging upwards, with lenders pulling deals and repricing higher.
“This suggests we will see some volatility in the market for a while to come.”
Former RICS residential chairman and current north London estate agent Jeremy Leaf, says ‘the signs are perhaps not as bad as we may have feared’.
However, he warned that the figures ‘probably reflect decision-making from a few months ago, so will not include much of the turmoil that followed the recent increase in mortgage rates’.
“Nevertheless, we are still finding a determination to get sales done even if they are taking longer and the market is more price-sensitive. This is resulting in some heavy negotiations,” he adds.
More2life’s managing director Ben Waugh says: “Despite an increase in the interest rate, the robustness of the market has been shown with mortgage approvals rising from April to May.
“Rising rates, though problematic in the short-term, will hopefully help to control inflation throughout the second half of the year, reducing pressure on borrowers and seeing a return of more consumer confidence.
“The recent announcement of government measures to support existing mortgage holders who may be struggling will help to alleviate some of the affordability pressure in the market but for some it simply kicks the can down the road.
“Indeed, extending your borrowing period and moving from a repayment mortgage to an interest-only product will reduce monthly payments but fundamentally the debt will still need to be repaid”.
The Bank of England’s monthly statistics show the amount of, and interest rates on, borrowing and deposits by households and businesses.
They are used by the Bank’s policy committees to understand economic trends and developments in the UK banking system.
