Mortgage market sees May boost, but will it continue?

After slowing down in April, the housing market showed more positive signs in May.

The total amount of net mortgage debt rose to £2.1 billion in May, an increase of £2.8 billion on the previous month after borrowing fell sharply in April, according to the Bank of England’s latest Money and Credit release.

Furthermore, net mortgage approvals in May increased by 2,400 to 63,000, marking the first monthly rise in approvals this year.

“The sentiment in the latest statistics from the Bank of England shares a positive momentum in the housing market, as a rise in approvals can be associated with confidence among borrowers,” Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, commented.

The conclusion of the higher stamp duty relief at the end of March meant that many expected a slowing of activity in April, but Springall points out that “it is positive to see activity has not been hit too hard, with both purchase and remortgage markets in a flurry during May”.

Remortgaging saw a boost, as the number of approvals with a different lender increased by 6,200 between April and May to stand at 41,500. This was the largest monthly increase recorded since February 2024.

With approximately 1.6 million fixed mortgage deals due to end in 2025, according to UK Finance, it’s encouraging to see that many borrowers are being proactive about switching their mortgage and not just reverting to their lender’s Standard Variable Rate (SVR), which is likely to cost them more in the long term.

Indeed, Springall calculates that “a typical mortgage borrower being charged the current average Standard Variable Rate of 7.48% would be paying £370 more per month, compared to a typical two-year fixed rate (£250,000 mortgage over 25 years).”

Summer surge or slump?

Spring is often a busy time for the housing market, and the latest House Price Index from property website Zoopla underlines this. It found the number of sales agreed was at its highest level in four years, with 14% more properties on the market than one year ago.

While buyers may welcome a greater choice of properties, this is appearing to have an impact on prices. House prices continued to increase by 1.4% year-on-year in May to £268,400, but this is a slower pace of growth than in previous months, indicating that sellers should be realistic when it comes to setting their sale price.

Nationwide’s House Price Index for June, which is calculated using lending data from the building society, also highlighted the further slowing of house price growth. It found that house prices fell by 0.8% between May and June, which Robert Gardner, Nationwide's Chief Economist, said could reflect “weaker demand following the increase in stamp duty at the start of April”.

However, he adds that they “expect activity to pick up as the summer progresses” as “underlying conditions for potential homebuyers in the UK remain supportive”.

For example, mortgage rates have been on a downwards trend over the past few weeks, and Springall explains that it "looks promising for more fixed rate cuts to continue due to swap rate moves (which lenders watch very closely to re-price their loans)”.

Moreover, several lenders have been relaxing their stress tests, which could help borrowers get approved for larger mortgages, as long as they can still afford the repayments.

If you’re planning to take out a mortgage this summer, it’s a good idea to speak to a broker first. They will be able to help you find the right mortgage deal for your situation, offering tailored advice and guidance based on your circumstances and preferences.