The number of mortgages approved in September reached a level not seen in the two years since the Liz Truss mini-budget.
According to figures from the Bank of England, the month had the greatest number of mortgage approvals since August 2022, the period just before the market turmoil brought about by Ms Truss’s financial statement.
Reduced interest rates appear to have helped stoke house buying demand as the central bank enacted the first rate cut in four years, bringing the rate down to 5% in August.
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Following the cut, 65,647 mortgages were approved, beating market expectations.
Similarly, remortgaging approvals with a different lender increased by 3,100 to 30,800.
While the base interest rate stood at 5%, new Bank of England statistics also released on Tuesday showed people actually paid an average of 4.76% on newly drawn mortgages in September.
The average rate on the outstanding stock of mortgages, however, rose slightly to 3.74%, from 3.72% in the previous month.
The two years after the September 2022 mini budget saw mortgage costs spike, with average rates topping 6% on two- and five-year fixed deals at some points.
In the days following the Liz Truss government’s major spending and tax cutting announcement, the Bank of England stepped in to fix a broken part of the financial market.
In addition to the plunge in the value of the pound to a record low, investors demanded a greater rate of return for UK government bonds – essentially IOUs.
The Bank of England also raised rates to combat post-COVID inflation which was due to a range of causes, especially supply side delays and shortages.
An era of low interest rates had previously prevailed, especially during the COVID-19 pandemic when borrowing was made cheaper to stimulate economic growth.
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Just three years ago, in October 2021, the average rate on a five-year deal was 2.55%, according to figures from financial information company Moneyfacts.
On Tuesday, the average rate on a five-year deal was 5.09%.
