Mortgage approvals for home buyers dropped to their lowest level in two years in January, falling below 60,000 for the first time since early 2024, according to the latest figures from the Bank of England.
Data from the Bank’s Money and Credit report showed that just 59,999 mortgage approvals for house purchases were recorded in January 2026. This marked the weakest monthly total since January 2024, when approvals stood at 55,946. The decline highlights the continued caution among buyers as economic uncertainty and affordability pressures weigh on confidence.
Remortgaging activity also softened at the start of the year. Approvals for borrowers switching to a new lender fell slightly to around 38,100 in January, down from 38,400 in December. Although the change was modest, it suggests households remain hesitant to refinance despite expectations of lower interest rates later in the year.
The figures were released as the Nationwide Building Society reported that house price growth remained stable in February. Nationwide said average UK house prices rose by 0.3% month on month and were 1.0% higher than a year earlier. This placed the typical property price at £273,176.
Despite these small gains, analysts noted that house prices are still falling once inflation is taken into account. Lucian Cook, head of residential research at Savills, explained that weak real-term price growth is gradually improving affordability, particularly in London and the South of England. However, he added that many potential buyers remain reluctant to act due to the wider economic climate.
Cook also pointed out that the upper end of the housing market continues to struggle. Activity for homes priced above £1 million is down by more than 3% compared with last year, suggesting that any recovery is happening slowly and from the lower end of the market upwards.
Richard Donnell, executive director at Zoopla, said the latest mortgage approval figures reflect broader market trends. He noted that while sales activity has been recovering since 2023, momentum now appears to be levelling off rather than accelerating.
Rob Wood, chief UK economist at Pantheon Macroeconomics, described the January approvals data as weaker than expected. He said the figures likely reflect uncertainty surrounding the recent Budget, which may have dampened sentiment among buyers. Nevertheless, he remains optimistic that housing transactions will pick up again as confidence improves.
Jason Tebb, president of OnTheMarket, highlighted the positive impact of interest rate cuts last year. He suggested that further reductions in 2026 could provide an additional boost to market activity and help encourage more buyers and sellers to return.
Estate agent Jeremy Leaf, who works in north London, said that buyers are still cautious even though inflation and mortgage rates are expected to continue falling. He observed that the growing supply of properties, particularly flats, is giving first-time buyers more choice and encouraging some to take their first step onto the ladder.
However, fresh global uncertainty could complicate the outlook. Simon Gammon, managing partner at Knight Frank Finance, warned that conflict in the Middle East has introduced new risks. Any rise in oil prices could push up inflation and delay further interest rate cuts by central banks, including the Bank of England.
Alongside housing data, the Bank of England also reported steady trends in consumer borrowing. Annual growth in consumer credit remained unchanged at 8.3% in January. Credit card borrowing slowed slightly, with growth easing to 12.3% from 12.4% in the previous month.
Household savings showed modest improvement. Deposits held with banks and building societies increased by £4.2 billion in January, following a £4.5 billion rise in December. Much of this growth was driven by an additional £5.2 billion flowing into Individual Savings Accounts (ISAs), although some of this was offset by withdrawals.
Business borrowing also rose sharply at the start of the year. UK non-financial companies borrowed a net £7.9 billion from banks and building societies in January, including overdrafts, compared with £1.1 billion in December. This suggests firms are turning to lending to manage cash flow and investment during an uncertain period.
Overall, the latest figures paint a mixed picture for the UK housing market. While prices are edging up slowly and affordability is improving in real terms, buyer confidence remains fragile. Mortgage approvals at a two-year low underline the challenges facing the sector, even as experts anticipate a gradual recovery later in the year if economic conditions stabilise.
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