Figures from the Bank of England revealed a 4% month-on-month rise in August from 62,500 approvals in July.
Homeowners remortgaging also increased between July and August from 25,200 to 27,200 approvals.
The actual rate of interest paid on newly drawn mortgage rose month-on-month from 4.81% to 4.84% while the rate on the outstanding stock of mortgages rose by 3 basis points to 3.72% as more borrowers rolled off low fixed rates, locking in to more expensive deals.
Meanwhile, gross lending saw an increase of £0.3 bn to £19.9 bn in August.
Net borrowing, the difference between the amount borrowed and the value of debt repaid, also rose from £2.8bn in July to £2.9bn in August.
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The annual growth rate for net mortgage lending rose for the sixth consecutive month, from 0.6% in July to 0.7% in August, the highest since August 2023.
Buyers emerge from “summer hibernation”
More positive news came from Nationwide’s House Price Index which showed that between August and September house prices rose by 0.7% and annually prices increased by 3.2%.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “A good way of establishing whether the recent housing market improvement is likely to be sustained is to look at mortgage approvals – and these figures are no exception.
“Following hard on the heels of the acceleration in house prices as reported by Nationwide, commitments to purchase are also climbing at their best rate for around two years.
“Buyers are emerging from summer hibernation to take advantage of cheaper mortgages with the prospect of more to come, as well as an increasingly-settled economic and political background.”
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the online investment platform, added: “Improving mortgage rates and strong income growth have eased the affordability challenge for some buyers in recent months with the Bank of England’s interest rate cut at the start of August and prospect of at least one more rate reduction to come this year energising the residential property market.
“This has not fully filtered through to the mortgage market just yet, as the effective rate on newly drawn mortgages rose by 3 basis points to 4.84% in August, highlighting that the financial pressures of the past few years have not eased entirely for borrowers.”
In August the Bank of England cut the base rate from 5.25% to 5%.
This article was first published on YourMoney.com‘s sister site, Mortgage Solutions. Read: Mortgage approvals at highest level since August 2022