Bank of England data showed the total mortgage approvals fell by 600 to 65,000 following a decline of 400 in January.
Meanwhile, the number of remortgages also decreased by 800 to 32,000 following a rise of 2,100 in January.
According to Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, this data is significant because it is an indicator of future borrowing.
She added: “The decline in mortgage approvals may reflect the downbeat mood at the start of the year when consumers evaluated the impact on the economy, and their personal finances, from Chancellor Rachel Reeves’ ‘punishing’ maiden Budget last October.”
She added: “The February decline in mortgage approvals may reflect buyers being realistic about their prospect of taking advantage of the stamp duty reliefs before they expire.”
The stamp duty deadline is today (Monday 31 March). Therefore, from tomorrow, the thresholds for the tax will fall meaning fewer people will be exempt from relief.
Haine added: “This will deliver a particularly heavy hit to first-time buyers who must not only raise enough money for a deposit but also enough to cover the higher tax bill.”
February was also the month the Bank of England reduced interests rates by 0.25% to 4.5%, so it may be surprising fewer mortgages were taken out.
However, Haine explained, at the same time, the effective rate – or the actual rate paid by borrowers – on newly drawn mortgages increased by 0.02% to 4.53% in February. So this may have impacted the number of approvals.
Despite the dip in approvals, mortgage brokers said the number of applications from buyers and borrowers has remained stable.
Andrew Montlake, managing director at Coreco, speaking via the Newspage agency, said: “Given the ongoing economic uncertainty, it’s been a relatively busy start to 2025 on the mortgage front. First-time buyers were particularly active in their efforts to beat the stamp duty deadline at the start of the year as the savings for many were significant.
“Demand started to drop off very slightly in February and March as the stamp duty deadline approached but borrowing activity by no means dropped off a cliff.
“With Santander last week tweaking its affordability rules, enabling people to borrow more, more lenders are likely to follow in their footsteps, and if this happens we could be in for a busier year than expected.
“A rate cut at the next Bank of England Monetary Policy Committee meeting in May would really ignite things but inflation will have to play ball. The National Insurance hikes due to come in in April could prove inflationary, which could throw a spanner in the works of rate cuts in the near term.”
