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Mortgage approvals rise as optimism grows for UK property market

The UK property market is showing signs of resilience and growth, with mortgage approvals for house purchases rising to 66,526 in December 2024, up 0.7% from November’s figure of 66,061. This marks a significant 27.7% increase compared to December 2023, when approvals stood at 52,087. Over the course of 2024, total mortgage approvals reached 754,983, a 30.8% jump from the 577,173 recorded in 2023. With the potential for interest rate cuts and lender innovations, the outlook for 2025 remains optimistic for landlords and property investors.

What’s driving the increase in mortgage approvals?
The steady rise in mortgage approvals reflects a stabilising property market, bolstered by improved buyer confidence and lender activity. Stephanie Daley, Director of Partnerships at mortgage advisor Alexander Hall, commented: “2024 was a year of very positive growth for the mortgage sector, with the number of approvals trending upwards. We expect more of the same throughout 2025.”

Daley highlighted several factors contributing to this growth, including the upcoming stamp duty deadline in April 2025, which has spurred short-term buyer activity. She added: “Long-term health is also expected to be driven by the potential easing of loan-to-income caps, which will improve affordability, and the expectation of further base rate reductions.”

Lender innovations and buyer confidence
Jonathan Samuels, CEO of specialist lender Octane Capital, noted that the market’s strength isn’t solely due to the stamp duty deadline. He said: “We saw 31% more mortgage approvals complete over the course of last year compared to 2023. While mortgage rates haven’t fallen as much as buyers may have hoped, they remain largely undeterred.”

Samuels also pointed to the role of lender innovations in supporting the market. “With the prospect of rates starting to fall in 2025, we expect another busy year for the mortgage sector,” he added. These innovations, combined with potential rate cuts, are likely to encourage first-time buyers and next-steppers, further boosting market activity.

What does a potential rate cut mean for landlords?
The Bank of England is widely expected to cut interest rates in early 2025, with markets pricing in an 84% chance of a reduction from 4.75% to 4.5%. Susannah Streeter, head of money and markets at Hargreaves Lansdown, explained: “The scene has been set for a rate cut, with December’s dip in inflation and the flatlining economy taking centre stage.”

While a rate cut could lower borrowing costs for landlords and investors, Streeter cautioned that inflationary pressures may limit rapid monetary policy changes. “Financial markets are pricing in two additional rate cuts this year, but there is likely to be more caution around the table,” she said.

For landlords, this presents a dual opportunity: lower mortgage costs could improve profitability, while increased buyer activity may drive demand for rental properties.

The combination of rising mortgage approvals, potential rate cuts, and lender innovations paints a promising picture for the UK property market in 2025. For landlords, this means greater opportunities to expand portfolios and capitalise on a growing market.

 

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