(fxcue news) - UK mortgage approvals increased to the highest level in more than two years in September suggesting renewed confidence in the housing market, official data revealed Tuesday. Mortgage approvals for house purchases, an indicator of future borrowing, rose by 700 to 65,600 in September, the Bank of England reported. This was the highest since August 2022. Likewise, approvals for remortgaging increased 3,100 to 30,800. However, net borrowing of mortgage debt by individuals dropped GBP 0.3 billion to GBP 2.5 billion in September. This was the first fall in four months. Nonetheless, annual growth in net mortgage lending continued its upward trend observed since April 2024. On year, net mortgage lending rose 0.9 percent, following prior month's 0.7 percent increase. The 'effective' interest rate, which is the actual interest paid on newly drawn mortgages decreased by 8 basis points to 4.76 percent in September. The BoE had reduced its benchmark rate by a quarter-point in August, which was the first reduction since March 2020. At the September meeting, the bank had maintained the rate at 5.00 percent. Consumer credit decreased to GBP 1.2 billion from GBP 1.4 billion in the previous month. Annual growth in consumer credit eased to 7.5 percent from 7.7 percent. Borrowing through credit cards fell to GBP 0.4 billion from GBP 0.5 billion. Meanwhile, net borrowing through other forms of consumer credit decreased to GBP 0.8 billion from GBP 0.9 billion. Capital Economics' economist Paul Dales said there is little evidence that the prospect of tax rises has caused households to become more cautious with their borrowing. While household borrowing and spending may be a bit softer after the scale of tax rises is revealed in tomorrow's Budget, the economy likely expanded in September and will grow by a decent 0.4 percent sequentially or so in the fourth quarter, the economist noted. Dales expects the bank rate to eventually fall to 3.00 percent from the current 5.00 percent, suggesting that mortgage rates will fall to around 3.60 percent by the end of next year.