(Bloomberg) -- UK mortgage approvals rose for the first time in four months in October as cheaper borrowing costs enticed buyers back into the housing market. 

Banks and building societies authorized 47,383 home loans, up from 43,675 in September and the most since July, the Bank of England said Wednesday. The figure was well above the 45,300 economists were expecting.

The figures chime with evidence from real estate agents that optimism is gradually returning to the housing market. Mortgage costs, which have tripled since the start of 2022, are now easing as the BOE signals it is done raising interest rates in its battle against inflation. 

Economists said activity in the housing market may be over its low point after the BOE halted its aggressive hiking cycle.


The average two-year fixed mortgage rate is currently at 6.06%, down from almost 6.9% at the start of August, according to Moneyfacts data. However, borrowing costs on home loans are still significantly higher than their levels before inflation took off, meaning many households are still facing a painful hit when they refinance. 

“With mortgage rates easing, the rise in mortgage approvals in October confirms that the trough in mortgage approvals is behind us,” said Imogen Pattison, economist at Capital Economics.

“But with mortgage rates unlikely to fall much below 5% until the second half of 2024, mortgage demand is likely to remain weak by normal standards.”

It is the latest data to point to the housing market bouncing back.

Figures from building society Nationwide showed house prices jumping 0.9% in October, the second consecutive monthly increase. Other surveys have suggested that buyers and sellers are slowly returning to the market.

The BOE data showed that households repaid £50 million ($63 million) of mortgage debt in October, following a repayment of £961 million in September.

The BOE also said that consumers took out £1.3 billion on unsecured credit such as credit cards, down slightly from £1.4 billion the previous month. Households deposited £4.6 billion with banks and building society following withdrawals in the previous two months. It was the most deposited in 11 months.

Its figures also suggested that the money supply contracted again in October, a fall that will fuel concerns among monetarist economists that the UK economy is heading into recession.

©2023 Bloomberg L.P.