UK mortgage approvals rose slightly in July, with new figures from the Bank of England showing 65,400 approvals compared with 64,600 in June. This modest increase of around 800 signals that activity in the housing market is beginning to pick up again after a quieter spell.
The improvement comes as expectations grow that the Bank of England will continue to reduce interest rates in the coming months. With many borrowers hoping for further cuts, confidence appears to be returning among those considering a move or remortgage.
Data also revealed that the effective interest rate on new mortgages fell once again, marking the fifth monthly drop in a row. The average rate eased from 4.34% in June to 4.28% in July, providing some relief for households facing higher costs in recent years.
However, while approvals have nudged higher, mortgage borrowing itself slowed down. Net borrowing in July stood at £4.5 billion, which was £900 million lower than June’s total of £5.4 billion. The change suggests that although more buyers are being approved, many are still cautious about taking on larger amounts of debt.
Nathan Emerson, chief executive of Propertymark, said the uptick in approvals was a positive sign of “consumer confidence and affordability.” He added that the Bank of England’s recent decision to trim the base rate by another 0.25 percentage points should encourage lenders to compete more aggressively, helping borrowers access better mortgage products.
The Bank of England’s data also showed annual net mortgage lending rising slightly, moving from 2.8% to 2.9%. Gross lending increased to £24.3 billion in July, compared with £24 billion in June. At the same time, gross repayments climbed from £19.2 billion to £19.7 billion, indicating that households are still focused on keeping up with debt repayments.
Richard Donnell, executive director at Zoopla, noted that mortgage lending for house purchases was up 3% compared with a year earlier. He described this as part of a steady recovery in the housing market, though he warned that risks remain, especially with talk of potential property tax changes and the impact of higher average mortgage rates.
The broader economic backdrop has also shifted. In August, the Bank of England cut the base rate to 4%, the fifth reduction within a year. This move brought borrowing costs down to levels last seen in early 2023, further easing pressure on homeowners and first-time buyers.
Stephanie Daley, from mortgage broker Alexander Hall, said that July’s increase in approvals marked the third monthly rise in a row. She pointed out that approvals have consistently stayed above 60,000 since March 2024, highlighting that demand for property has remained strong even in the face of economic uncertainty.
Nationwide’s chief economist, Robert Gardner, offered a more cautious view. He explained that while mortgage rates are now lower than last year’s peaks, they are still significantly higher than the record lows seen during the pandemic. According to Gardner, a typical first-time buyer with a 20% deposit now spends around 35% of their income on mortgage repayments, compared with the long-term average of 30%.
This affordability squeeze is being felt particularly hard by younger buyers and those entering the market for the first time. Higher repayments mean many households are having to stretch their budgets, making it more challenging to save or cover other living costs.
Alice Haine, personal finance analyst at Bestinvest, warned that homeowners coming off low fixed-rate deals are especially vulnerable. Unless they have paid off a large part of their loan, they may face sharp increases in their monthly repayments. While today’s rates are less severe than last year’s highs, lenders have recently started to edge some rates back up, keeping borrowers on edge.
Haine recommended that borrowers work closely with independent mortgage brokers, who can help compare deals across the market. She also advised keeping an eye on rates even after securing a mortgage product, as switching deals mid-term could prove worthwhile if rates fall further.
Meanwhile, consumer credit levels also ticked higher. Net borrowing rose slightly to £1.6 billion in July from £1.5 billion in June. Of this, £800 million came from credit card borrowing, while other types of consumer credit made up the remaining £900 million.
Thomas Pugh, chief economist at RSM UK, said that the increase in both consumer credit and mortgage approvals suggests that household spending power is gradually improving. He believes this trend could support a recovery in the housing market, potentially lifting house prices again despite a recent dip in Nationwide’s August index.
Overall, the latest figures point to a cautiously improving outlook. With interest rates falling and demand remaining steady, the housing market appears to be regaining some momentum. However, affordability pressures and economic uncertainty still mean that buyers and homeowners alike will need to remain careful when making financial decisions in the months ahead.
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