UK Mortgage Approvals Cool
UK mortgage approvals fall to 56,100 in July as borrowing costs pressure the housing market.
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Key Points
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The rate on the outstanding stock of mortgages edged up to 3.97% in July, while the effective rate paid on new mortgages rose to 4.45%.
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Mortgage pricing remained volatile as swap rates underpinning pricing were described as extremely volatile in response to tensions in the Middle East.
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July data showed credit card borrowing fell to £900 million, while other consumer credit rose to £1.1 billion, indicating households leaned away from cards but continued to borrow for other purposes.
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Liquidity metrics signaled tighter money conditions: M4ex fell to negative £10.1 billion, while M4Lex dropped to zero in July, with households adding about £3.8 billion to money holdings.
UK mortgage approvals fell to 56,100 in July, the lowest in over two years, as higher borrowing costs continued to squeeze home-buyers Bank of England. The drop from 58,200 in June marks a sharp pullback in housing demand, with approvals now sitting well below the six-month average of 60,800. Meanwhile, the effective interest rate on new mortgages rose to 4.45%, adding further pressure on affordability.
Net mortgage borrowing slid to £4.3 billion in July, down sharply from £7.7 billion in June TradingView, signaling that buyers are holding back. Remortgage approvals edged up to 34,500, suggesting some borrowers are locking in deals before rates climb further. The broader picture shows a housing market caught between higher costs and buyer hesitation, even as some lenders trim rates to attract demand.
Home-Buyer Activity Hits Two-Year Low
Mortgage approvals for house purchases fell 3.6% in July to 56,100, the weakest showing since early 2022 Mortgage Solutions. This is a clear signal that higher interest rates are keeping potential buyers on the sidelines. The six-month average sits at 60,800, meaning July approvals trailed that benchmark by about 7.8%, or roughly 4,700 deals.
Buyers are increasingly cautious as affordability remains strained. The effective rate on new mortgages climbed to 4.45%, making monthly payments steeper for first-time and repeat purchasers. Even as gross lending fell to £25.9 billion, the pressure on household finances keeps many potential borrowers waiting for clearer signals on where rates might head next.
Remortgage Approvals Rise Amid Rate Uncertainty
While home-purchase approvals dipped, remortgage numbers ticked up to 34,500, suggesting borrowers are actively seeking to lock in rates before they rise further Mortgage Solutions. This shift reflects anxiety about future rate paths. Households already on mortgages see refinancing as a way to protect themselves against steeper borrowing costs down the line.
The rate on outstanding mortgages edged up to 3.97% in July, a small move that still adds pressure across the £1.6 trillion mortgage stock. Swap rates—which underpin mortgage pricing—remained extremely volatile in response to geopolitical tensions, making it harder for lenders and borrowers alike to predict stable pricing.
Consumer Credit Shows Mixed Signals
Credit card borrowing fell sharply to £900 million in July, the lowest in months, as households pulled back on unsecured debt. But other consumer credit rose to £1.1 billion, showing that borrowing appetite hasn't vanished—it's just shifting away from cards toward other forms of lending like car finance and personal loans.
Overall, households added about £3.8 billion to cash holdings in July as money conditions tightened. M4ex fell to negative £10.1 billion while M4Lex dropped to zero, signals that liquidity is contracting. This mix suggests caution on big purchases like homes, but modest continued spending elsewhere in the economy.
Market Remains Weak on Rate Headwinds
The UK housing market is caught in a holding pattern. Buyers are waiting for clearer signals on interest rates before committing to large purchases, while lenders trim rates at the margins to entice demand. But with monthly approvals at their lowest in two years, it's clear that price competition alone isn't enough to overcome the affordability squeeze.
Analysts expect lending momentum to remain weak until either rates fall or household incomes rise enough to offset higher borrowing costs. For now, the data points to a market in pause mode—buyers window-shopping, borrowers refinancing, and the overall credit cycle cooling from its recent peaks.
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