LONDON: The number of mortgages approved by British lenders jumped in March to its highest since October, but remained lower than before then-Prime Minister Liz Truss’s September mini-budget triggered a lending crunch.

Lenders approved 52,011 mortgages for house purchase in March, up sharply from 44,126 in February and well above the average 46,250 forecast in a Reuters poll.

However, mortgage approvals are still running well below their average of around 70,000 before the mini-budget, and net mortgage lending - which usually reflects mortgage approvals from a month before - rose at the slowest pace since July 2021, early in the COVID-19 pandemic.

“Overall, higher interest rates were a further drag on lending in March, particularly on the housing market,” said Capital Economics’ UK economist Ashley Webb.

Markets expect the BoE to raise its key interest rate for a 12th meeting in a row next week to 4.5%, up from 4.25%.

The BoE said the average interest rate on new mortgage borrowing in March was 4.41%.

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Britain’s housing market has slowed sharply over the past six months as a result of higher interest rates and bond market turmoil during Truss’s brief period as prime minister which led to a temporary halt in mortgage lending.

Mortgage lender Nationwide reported on Tuesday that average house prices in April were 2.7% lower than a year earlier and 4% below their peak in August, though they are still around 25% higher than before the pandemic.

Households withdrew a net 4.8 billion pounds ($6.0 billion)from accounts with banks and building societies in March - the biggest outflow since BoE records began in 1997 – and added 3.5 billion pounds to government savings accounts.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said these moves reflected both financial pressures on households and concerns about the safety of savings after the collapse of Silicon Valley Bank.

“Households now are actively drawing on their savings to prop up their consumption, but also restructured their liquid assets … to benefit from a comprehensive government guarantee,” he said.

Tighter financial conditions suggested the BoE might do better not to raise interest rates next week, he added.

Thursday’s data also showed a sharp rise in unsecured consumer lending, which is now 7.9% higher than a year earlier, its fastest annual growth since November 2018.