Market bounce stalls as mortgage approvals fall

Hopes of a mini recovery in the housing market appear to have been dashed after the latest mortgage approval data showed a slump in the total.

Mortgages agreed decreased to 56,100 in July, down 2,100 from 58,200 the previous month, according to the Bank of England.

The June figure had seen a monthly rise from 56,565, prompting some hopes that the market was picking up.

Net borrowing of mortgage debt by individuals decreased to £4.3billion in July, from £7.7billion in June, below the previous six-month average of £5.3billion.

Approvals for remortgaging increased to 34,500 in July, from 34,100 in June.

The effective interest rate on newly drawn mortgages increased to 4.45% in July, from 4.35% the previous month. The rate on the outstanding stock of mortgages was 3.97% in July, up slightly from 3.96%.

Industry reaction

Anthony Codling, Managing Director of Equity Research at RBC Capital Markets, says: “Mortgage approvals for house purchase fell to 56,053 in July, down 3.7% month-on month and down 15.0% year-on-year.

“It sits 7.3% below the five-year average and 13% below the ten-year average, marking a disappointing retreat from the firmer run-rate we’d grown accustomed to through much of 2024 and early 2025.

“This is a pebble in the shoe for housebuilders who had been cautiously optimistic that demand momentum would hold through the summer. The July figure suggests buyers are pulling back, not what the sector needs as it heads into the all-important autumn selling season.

“However, this weak data may spur the Government on to stimulate the housing market in next month’s budget.”

Jason Tebb, President at OnTheMarket, says: “Approvals for house purchases, a more useful measure of market activity than prices as they indicate future borrowing, fell in July and remain below the previous six-month average as ongoing political and economic uncertainty impacts buyer and seller decision-making.

“With the effective interest rate on newly drawn mortgages increasing to 4.45% in July from 4.35% in June, the impact of higher borrowing costs is also making itself felt. The Bank of England’s decision to hold base rate steady at recent meetings will help steady concerns if this approach continues into the autumn.”

There urgently needs to be stimulus for the housing market.”

Gareth Lewis, Deputy Chief Executive of MT Finance, says: “Earlier this year, approval numbers were picking up quite nicely, before dipping in May and now falling again. We are seeing the ramifications of the unstable interest rate environment and the impact this has on transactions.

“There urgently needs to be stimulus for the housing market, with the new prime minister required to do something to encourage transactions and activity, which will benefit the wider economy. Volatile funding rates are the real issue; while everything pointed towards a lower interest rate environment this year, the impact of war in the Middle East has since changed this outlook.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “The number of enquiries is increasing slowly and certainly better than a few months ago, but not nearly at the same pace as this time last year.

“We are hoping that demand will increase now that the holidays are behind us and buyers can take advantage of better affordability, with salaries increasing faster than house prices despite the increase in mortgage costs since the start of the year.

“Approvals are a good indicator of activity over the next three months at least and these suggest buyers and sellers are cautious about prospects while economic and political factors remain so uncertain.”

Speculation ahead of the Budget presents another risk.”

Hina Bhudia, Partner at Knight Frank Finance, says: “Geopolitical tensions and elevated energy prices pushed mortgage rates higher during the summer, which has weighed on demand in the housing market. Leading fixed rates have been broadly stable in recent weeks, with two-year fixed rates as low as 4.45%, but we’d need to see those rates fall closer to four before a more sustained recovery takes hold.

“That looks unlikely in the near-term, given the renewed hostilities in the Middle East. Speculation ahead of the Budget presents another risk. In previous years, reports of potential changes to property taxation have prompted buyers to put plans on hold. This year has been quieter, but speculation regarding the contents of the Budget will only rise as we move through September.”

Nathan Emerson, Chief Executive of Propertymark, says: “Recent months have seen lower levels of mortgage approvals and lending, reflecting continued pressure on household finances and caution around moving home.

“With the Autumn Budget due next month, many people may be holding back on major housing decisions until there is greater economic clarity, particularly groups such as first-time buyers, for example.

“Across the year, we have seen ambition across all nations regarding the delivery of new sustainable homes, alongside the infrastructure needed to support new developments. As the year draws to a close, it would be encouraging to see mortgage approvals and net lending find a firmer footing. However, this is likely to remain closely aligned with the wider global economy.”

Nick Leeming, Chairman of Jackson-Stops, says: “Today’s fall in mortgage approvals from 58,200 to 56,100 reflects the volatility in mortgage pricing seen during July, as changing inflation and interest-rate expectations affected the confidence and affordability calculations of some buyers.

“However, the figure should not be taken as a complete indication of the market entering the autumn. Our research found that 8% of owner-occupiers in England are planning to move or are already doing so, demonstrating a meaningful pool of underlying demand. With the summer holiday period drawing to a close and greater clarity around property taxation due in the Budget, there is scope for more of those plans to translate into activity over the coming months.

“Buyers continue to benefit from considerable choice; sellers who respond to current market evidence will be best placed to capture that demand. Realistic pricing does not mean leaving value on the table; it means creating the conditions for committed, finance-ready buyers to compete.”