Mortgage approvals spike ahead of Iran war

(Sharecast News) - Mortgage approvals rebounded in February, official data showed on Monday, beating expectations for a more modest increase. According to the Bank of England's latest Monday and Credit report, net mortgage approvals rose to 62,584 last month, ahead of consensus for 61,300 and up on January's surprisingly weak 60,246.

Net borrowing of mortgage debt by individuals increased to £4.8bn from £4.2bn a month previously, while the effective interest rate - the actual interest paid - on newly-drawn mortgages edged up to 4.1% from 4.09%.

The housing market faltered at the end of 2025, weighed down by the long run-up to the later-than-usual Budget and the traditionally quiet month of December. Industry surveys showed sentiment picking up in January as activity ramped up, but war in the Middle East and the ensuing surge in oil prices since then has made market watchers more cautious, as inflation risks build and interest rate hikes are priced back in.

Matt Swannell, chief economic advisor to the EY Item Club, said: "We suspect the pick-up in activity merely reflects an unwinding of past weakness, which appeared at odds with other measures of housing market conditions.

"Both two and five-year swap rates have risen sharply since the outbreak of the conflict, with financial markets expecting higher inflation to result in tighter monetary policy.

"Although the scale of the recent repricing appears overdone, we're now expecting a prolonged pause from the Monetary Policy Committee. With higher mortgage rates expected to reverse some of the recent gains in mortgage affordability, mortgage demand is likely to cool."

The monthly Money and Credit report also showed net borrowing by individuals increased slightly to £1.9bn from £1.8bn in January. Of that, net borrowing on credit cards was £0.8bn, down on January's £0.9bn.

Household deposits with banks and building societies, meanwhile, increased by £5.8bn, following net deposits of £4.3bn in January.