Mortgage approvals for house purchases in the UK fell to 54,900 in August, the lowest level since December 2023, according to data from the Bank of England. This marks a decrease from 55,900 in July, and the figure is below the average of about 60,100 approvals seen over the previous six months.
Bank of England data shows decline in approvals
The Bank of England's figures, released on Thursday, show that mortgage approvals – which are considered a leading indicator of future borrowing – have now slipped to their lowest point since the end of 2023. Stripping out seasonal adjustments, there were 54,918 mortgages approved in August, the lowest since January, which typically sees a post-Christmas lull.
The data also reveals that the number of remortgaging approvals, which only capture remortgaging with a different lender, decreased to 34,000 in August, down from 34,600 in July. This suggests that refinancing demand has softened, even as many borrowers reach the end of their existing fixed-term rates.
Interest rates on new mortgages rise
The Bank of England's figures also show that the 'effective' interest rate on new mortgages increased to 4.60% in August, up from 4.45% in July. This rise in rates is adding to the affordability pressures facing potential homebuyers.
Katie Clinton, head of financial services advisory at KPMG UK, commented: "A further fall in mortgage approvals in August points to affordability pressures continuing to weigh on housing demand, as the shocks from the Iran conflict push up both inflation and mortgage rates." She added: "Meanwhile, the drop in remortgaging suggests refinancing demand softened, despite many borrowers reaching the end of existing fixed term rates."
Market experts point to volatility and housing wealth
Lucian Cook, head of residential research at Savills, noted that this marks the fourth month in a row with fewer than 60,000 mortgage approvals. "The weakness in these numbers reflects the recent volatility in the mortgage markets, which have made it more expensive for people to take on a bigger mortgage," he said.
Cook also highlighted the impact of limited housing wealth accumulation. "This has been compounded by the lack of housing wealth accumulated by homeowners over the past four years, given the pressure on house prices since September 2022," he explained. "Upsizers, in particular, are putting off plans to move, until they have more confidence in their personal finances and their ability to service more debt."
The continued decline in mortgage approvals points to ongoing affordability challenges in the UK housing market, with potential buyers and those looking to remortgage facing higher costs and economic uncertainty.
