UK mortgage approvals increased to a one-and-a-half year high in March as the impact of higher interest rates waned, data published by the Bank of England showed on Tuesday.

Net mortgage approvals for house purchases increased to 61,300 in March from 60,500 in February. This was the highest since September 2022 and also above the expected level of 61,000.

By contrast, net approvals for remortgaging decreased to 34,200 from 37,700 in the previous month.

The effective interest rate, which is the actual interest paid on newly drawn mortgages, fell by 17 basis points to 4.73 percent in March.

Over the last five consecutive meetings, the BoE has kept its interest rate unchanged at 5.25 percent, the highest level since early 2008.

Data showed that individuals borrowed only GBP 0.3 billion of mortgage debt in March compared to GBP 1.6 billion borrowing in February. On a yearly basis, net mortgage lending fell 0.1 percent.

Meanwhile, gross lending increased to GBP 20.1 billion from GBP 18.6 billion in February. This was the highest figure since February 2023.

Consumer credit rose to GBP 1.6 billion from GBP 1.4 billion in the previous month. Consumer credit growth held steady at 8.8 percent in March.

Net borrowing through credit cards climbed to GBP 0.7 billion, while borrowing through other forms of consumer credit remained unchanged at GBP 0.9 billion.

Further, businesses repaid a net GBP 1.1 billion of loans compared to GBP 2.8 billion in February. The annual growth in borrowing by large businesses eased to 0.5 percent from 1.4 percent. Lending to SMEs posted a broadly stable decline of 4.7 percent.

These figures provide further evidence that the drag from high interest rates is fading, the supply of credit is increasing and the economic recovery is well underway, economists at Capital Economics, said.