UK mortgage approvals for homebuyers climbed in February, reaching their highest level in three months, despite emerging signs that higher borrowing costs are beginning to impact overall demand. According to the latest data from the Bank of England, net approvals for house purchases rose to 62,600 in February, up from 60,200 in January. While this marks the strongest monthly total since November, it remains slightly below the six-month average of 63,500.
Borrowing activity also showed an uptick. Individuals took on £4.8 billion in mortgage debt in February, an increase from £4.2 billion the previous month, and above the recent average of £4.5 billion. This points to a modest rebound in the housing market at the start of the year.
However, the broader outlook for the property market is becoming less certain. Expectations that borrowing costs will rise further—driven by inflation pressures and higher energy prices—have led analysts to predict at least two additional Bank of England rate hikes this year. These developments could influence both buyer behaviour and the pace of mortgage approvals in the coming months.
Consumer credit growth also accelerated during February, with individuals borrowing £1.9 billion, up from £1.8 billion in January. While credit card borrowing fell slightly to £800 million from £900 million, other forms of credit, including car finance and personal loans, increased to £1.2 billion from £900 million, marking the fastest expansion in nearly two years.
Despite these positive indicators, more recent data suggests that momentum may be slowing. Buyer demand in March was down 13% year-on-year, reflecting the effect of higher mortgage rates and economic uncertainty on household confidence. According to the latest Zoopla index, annual house price growth held steady at 1.3% in March, unchanged from February, but agreed sales fell by 2% compared with the previous year. Much of the activity was driven by buyers who had already secured financing prior to the increase in rates.
Rising mortgage costs have made some prospective buyers more cautious. Average two-year fixed mortgage rates have increased sharply in recent weeks, up by 92 basis points since the outbreak of the Middle East conflict, further intensifying affordability concerns. These developments are likely to influence buyer decisions in the months ahead.
Alongside the property market, UK consumers are seeing changes in other financial areas. For instance, Wise, the London-based money transfer company, has launched a current account in the UK offering a 3.26% variable interest rate on balances. This move positions Wise as a competitor to established high-street banks and other fintech rivals such as Monzo and Revolut. The account allows users to manage everyday payments, set up direct debits, and send money internationally, all at low cost with no hidden fees.
For savers, the clock is ticking to make the most of cash ISAs before new caps take effect in April 2027. Currently, savers can deposit up to £20,000 tax-free, but the allowance will be reduced to £12,000. Financial experts encourage using the remaining ISA allowance wisely, considering both cash and stocks and shares ISAs to maximise potential growth and tax efficiency.
Meanwhile, rising fuel prices continue to put pressure on households and businesses. Petrol prices have hit 152p per litre, while diesel has surged past 180p, marking the highest levels in over two years. Drivers are paying significantly more at the pump, with diesel motorists seeing the steepest increases. Organisations such as FairFuelUK are calling for government action to freeze fuel duty and improve price transparency, arguing that rising costs threaten both small businesses and household finances.
The cost-of-living pressures are reflected in broader consumer behaviour. Recent surveys suggest that half of UK households are struggling to cover the cost of essentials, with many dipping into savings or selling possessions to make ends meet. Confidence in both personal finances and the national economy has fallen sharply, highlighting the challenges faced by households amid inflation and rising costs.
On the housing front, affordability continues to vary across the UK. Research shows that £100,000 can stretch further in some regions, particularly in the North East of England. For example, in DN32, North East Lincolnshire, £100,000 buys around 78.4m² of space, while nearby postcodes such as NE17 and LA18 also offer strong value. Comparatively, the UK average for the same budget is just 28.6m², underscoring the disparity in housing affordability across the country.
Despite the slowdown in buyer demand, the housing market is being supported by homeowners with existing mortgages or substantial equity. Around a quarter of property transactions are cash purchases, which helps to sustain activity even as mortgage rates rise. House price growth remains modest but steady at 1.3% annually, with the strongest increases observed in more affordable regions such as the North West.
In conclusion, while February’s mortgage approvals suggest a temporary rebound in borrowing activity, rising rates, inflationary pressures, and global uncertainties are prompting caution among buyers. Prospective homeowners may face higher costs and slower market growth in the months ahead, making careful financial planning and awareness of current market conditions more important than ever.
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