The UK housing market showed signs of slowing in October as uncertainty around the autumn Budget weighed on buyers’ confidence. The latest Bank of England (BoE) figures indicate a small decline in mortgage approvals for house purchases.
Net approvals for home purchases fell by around 600 to a total of 65,000 in October. Meanwhile, remortgaging approvals dropped by 3,600 to 33,100, marking the lowest monthly total since February 2025. Net mortgage borrowing by individuals also eased to £4.3bn, down from £5.2bn in September.
Property agents and analysts suggest that speculation over potential Budget measures, such as a mansion tax on high-value homes, contributed to the reduced demand. Buyers appear to have been cautious as they awaited clarity on government plans.
Nathan Emerson, chief executive of Propertymark, said that the autumn Budget uncertainty may have played a role in the drop in mortgage approvals, affecting market activity during the month.
The government ultimately introduced a high-value council tax surcharge in England for homes over £2m, set to take effect in April 2028. The surcharge will include four bands, beginning at £2,500 annually for properties over £2m and rising to £7,500 for homes worth more than £5m.
Jason Tebb, president of OnTheMarket, commented that the speculation surrounding potential Budget measures clearly influenced mortgage approvals, which are often used as an indicator of future borrowing trends.
Jeremy Leaf, former RICS residential chairman, noted that mortgage approvals are a reliable predictor of market activity. He explained that the October figures demonstrate the tangible impact of uncertainty on prospective buyers.
Remortgaging activity also declined in October. The 33,100 approvals recorded marked the weakest monthly total since February, reflecting a broader sense of caution among homeowners considering switching lenders.
Richard Donnell, executive director at Zoopla, observed that demand for mortgages fell as buyers waited for clarity on potential property taxes. He expects activity to rebound in early 2026 now that the threat of additional taxes on homes between £500,000 and £2m has been removed.
Zoopla had previously warned that rumours of broader property taxes, potentially affecting homes above £500,000, had created additional uncertainty in the market and were suppressing buyer confidence.
BoE data also revealed a slight easing in mortgage interest rates. The “effective” interest rate on new home loans dipped to 4.17% in October, down from 4.19% in September, marking the lowest level since January 2023.
Beyond the housing market, corporate borrowing also softened. Private non-financial companies made net repayments of £4.8bn in October, the largest monthly reduction since October 2023.
Consumer credit growth remained steady at 7.2% year-on-year, while credit card borrowing rose slightly to 10.9%. Households deposited an additional £6.8bn into banks and building societies, including £4.2bn into cash ISAs, up from £2.4bn in September.
The surge in cash ISA deposits was partly driven by upcoming changes in the Budget. From April 2027, the annual adult cash ISA subscription limit will fall to £12,000, though the overall ISA allowance will remain £20,000. Savers over 65 will retain full access to the £20,000 limit.
Alice Haine, personal finance analyst at Bestinvest, said the spike in cash ISA deposits reflected anticipation that limits for younger savers would be reduced. She added that HMRC plans to prevent transfers from stocks and shares ISAs to cash ISAs to circumvent the cap and may introduce charges on cash held in investment ISAs.
Mark Hicks, head of active savings at Hargreaves Lansdown, noted that speculation over the ISA changes contributed to continued inflows into cash ISAs. He encouraged savers to take advantage of higher fixed-term rates before a likely base rate cut later this month.
Finally, lending trends differed by business size. Annual borrowing growth slowed to 6.9% for large companies in October, down from 8.2%, while the rate for small and medium-sized enterprises (SMEs) held steady at 1.6%, showing a divergence in borrowing patterns across sectors.
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