Credit approval surge in March is a ‘picture of what could have been’

Home buying contracts for home buyers rose to three months in February, according to figures from the Bank of England.

About 62,584 mortgages were approved for home purchases in February, marking the highest monthly number since November 2025, when 64,501 approvals were made.

Repossessions, which hold the amount to be repaid only through a different loan, also increased to 41,200 in February, from 38,500 in January.

Recent weeks have seen uncertainty in the mortgage market, with lenders raising prices and pulling deals as tensions in the Middle East have changed market expectations. Exchange rates, which lenders use to buy loans, are rising.

Karen Noye, credit expert at wealth manager Quilter said: “The latest Money and Credit figures from the Bank of England paint a picture of what could be in store for the credit and housing markets…

“Given these data taken in February, and March seeing a rapid reversal of any real progress made on mortgage rates and consumer confidence, we can expect this positive change to be short-lived.

“Prospective homebuyers and movers who were promised low interest rates will have their hopes up.”

Mark Harris, managing director of mortgage broker SPF Private Clients, said: “Repossession numbers have increased, suggesting that low-rate borrowers are shopping around for a better deal rather than choosing the convenience of sticking with their existing mortgage.

“We expect this to increase in the coming days and weeks as new mortgage rates rise.”

Caitlyn Eastell, a financial analyst at information website Moneyfacts, said: “Lenders are entering the market cautiously after withdrawing a number of deals following the escalation of the Middle East conflict.

“As of Tuesday last week, about 350 deals have returned, but at higher prices, leading to a significant increase in average prices.

“The two-year fixed rate rose to 5.77%, the highest since August 2024.

Meanwhile the five-year fixed rate rose to 5.70%, the highest since November 2023.

“Even as product choice recovers, higher prices are likely to grow on top of existing pressures, and many borrowers can expect their monthly payments to increase.”

Jeremy Leaf, a north London estate agent, said: “As recent events in the Middle East continue so we have seen in our offices the inevitable effect of confidence, particularly in terms of house costs and price rises.

“Consumers based on demand are still active, but the overall numbers are down. So far the volume of sales is continuing although there are still concerns about how much costs can rise in the short term at least they are continuing.”

Looking at other types of household borrowing, such as credit cards, personal loans and overdrafts, the Money and Credit Report said the annual growth rate for all consumer credit rose to 8.5% in February, from 8.3% in January.

Household deposits with banks and building societies increased by £5.8 billion in February, after deposits of £4.3 billion in January. This was driven by households putting an extra £4.6 billion into Isas, the report said.

Alice Haine, private equity analyst at Bestinvest by Evelyn Partners, said: “The savings and credit figures for February feel like an out-of-date picture, as they came before the sharp rise in global energy prices caused by the Middle East conflict that started at the end of the month.

However, the data suggest a period in which savers and borrowers were feeling optimistic, with home buying approvals increasing and savings increasing, even as consumer lending also increased – suggesting that some household finances were already under pressure before the latest political shock.

“February optimism was driven by markets expecting a seventh rate cut in the near term, supported by a reduction in inflation – which was held at 3.0% – as well as an increase in unemployment and slower economic growth.

“The Bank of England has already responded by keeping interest rates at 3.75% – in a view that markets are describing as hawkish – and there is growing concern that a rate hike is imminent if inflationary pressures from the Middle East war intensify.”

Bank of England figures also show that in February, UK non-financial businesses borrowed $3.7 billion from banks and building societies, including overdrafts, after borrowing $8.0 billion in January.