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Signs of Revival Emerge in UK Housing Market

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UK Housing Market: The housing market, in the UK is starting to pick up as we move into the year indicated by a rise in approved mortgages. However overall activity remains subdued as potential homebuyers are exercising caution due to the prevailing interest rates.

New data released by the Bank of England reveals an uptick in approvals for home purchases increasing from 51,500 in December to 55,200 in January. Furthermore, there was an increase, in credit card borrowing month with individuals taking on £1.9 billion more in credit than they repaid.

Attention is now focused on interest rates, with mortgage lenders adjusting their rates rapidly since the beginning of the year. Initially, there were significant cuts to the cost of new fixed-rate deals, but these rates have begun to rise again in recent weeks.

Many prospective buyers are holding off on their plans, hoping for a probable interest rate cut by the Bank of England later in the year, which could influence lenders’ decisions.

The turbulence of the past year is evident in the Bank’s data, showing that homeowners actually repaid more mortgage debt than they borrowed in the year leading up to January—the first time this has happened in 30 years of comparable records. This trend is mainly due to people being uncertain to borrow when mortgage rates were high in the latter half of 2023. In January alone, mortgage repayments exceeded new lending by £1.1 billion.

Property sales at the beginning of the year showed a slight increase compared to December but were 12% lower than January of the previous year.

Karim Haji, Head of Financial Services at KPMG, commented, “While the rise in mortgage approvals offers some hope for recovery, the housing market remains weak. Affordability is still stretched with high interest rates.” He noted that the increase in borrowing reflects people using credit to navigate through January post-Christmas.

“Households are looking to the Bank of England and the Budget for relief from the rising cost of living. With expectations of further credit defaults, lenders must ensure customers have the necessary support in the months ahead,” he added.

The performance of the housing market is essential to the overall performance of the UK economy, emphasizing the importance of its current trajectory.

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