The UK housing market is showing further signs of slowing, with the number of mortgages approved for house purchases falling to its lowest level in more than two years.
According to the latest figures from the Bank of England, lenders approved 56,053 mortgages for home purchases in July. This was down from 58,215 approvals recorded in June and represented the lowest monthly total since January 2024, when 56,032 mortgages were approved.
Over the past six months, the average number of monthly mortgage approvals has been around 60,800, highlighting the recent weakness in demand from prospective home-buyers.
The figures come as uncertainty around mortgage rates continues to affect the housing market. Although affordability has gradually improved as house prices have remained relatively subdued compared with earnings, higher borrowing costs have continued to limit activity.
Remortgage Activity Picks Up
While new home purchase approvals declined, the number of remortgage approvals involving a different lender increased slightly.
Around 34,500 remortgages were approved in July, compared with approximately 34,100 in June. This suggests some borrowers are actively looking for more competitive deals as their existing fixed-rate mortgages come to an end.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said that some lenders had recently reduced mortgage rates. However, he noted that swap rates, which influence the pricing of fixed-rate mortgages, remained volatile due to ongoing geopolitical tensions.
The increase in remortgaging activity could indicate that more borrowers are willing to shop around rather than automatically remain with their current lender.
House Prices Edge Higher
The weaker mortgage figures coincide with a modest improvement in house prices.
Nationwide Building Society reported that the average UK property price increased by 0.2% between July and August, following a 0.1% fall in July. The typical property was valued at £275,465 in August, representing a 1.6% increase compared with the same month a year earlier.
Despite the monthly increase, the housing market remains relatively subdued as buyers continue to weigh up the cost of borrowing.
Lucian Cook, head of residential research at Savills, said that the rise in fixed mortgage costs during July had prevented improving affordability from translating into stronger market activity.
He also warned that persistent inflation could make a sustained recovery in housing activity difficult during the remainder of the year.
Higher Rates Continue to Affect Demand
Mortgage rates have remained sensitive to wider economic and geopolitical developments. Hina Bhudia, a partner at Knight Frank Finance, said higher energy costs and geopolitical tensions had pushed mortgage rates upwards during the summer, placing further pressure on demand.
For buyers, uncertainty over where interest rates will go next can make it harder to decide whether to purchase a property now or wait for potentially better borrowing conditions.
The Bank of England’s latest figures therefore suggest that affordability improvements alone may not be enough to encourage a stronger recovery while mortgage costs remain elevated.
Wider Household Borrowing Rises
The Bank’s Money and Credit data also showed that consumer borrowing increased during July.
Net consumer credit borrowing reached £2.0 billion, up from £1.9 billion in June and slightly above the previous six-month average.
Credit card borrowing accounted for £900 million of the total, down from £1 billion in June. Meanwhile, borrowing through other forms of consumer credit, including personal loans and car finance, increased to £1.1 billion from £900 million.
At the same time, households continued to add to their savings. Deposits with banks and building societies increased by £3.8 billion in July, although this was lower than the £6.2 billion recorded in June.
UK non-financial businesses also increased their borrowing, taking £1.8 billion in net loans from banks and building societies during July, compared with £1.6 billion in June.
What This Means for the Property Market
The fall in mortgage approvals points to continued caution among UK home-buyers. While house prices have shown some signs of stability and affordability has improved gradually, borrowing costs and wider economic uncertainty are still affecting purchasing decisions.
For property investors and landlords, weaker mortgage demand could also influence transaction levels and competition in the housing market. The direction of mortgage rates over the coming months is likely to remain an important factor in determining whether housing activity begins to recover.
For now, the latest data suggests that the UK housing market remains in a cautious phase, with buyers waiting for greater certainty around mortgage costs and the wider economy before making major purchasing decisions.
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