UK Mortgage Approvals Plummet to Two-Year Low in January
Mortgage approvals for home buyers in the United Kingdom have slumped to their lowest level in two years, according to the latest figures from the Bank of England. In January 2026, approvals for house purchases dropped to 59,999, marking the first time since January 2024 that the figure has fallen below the 60,000 threshold. This represents a significant decline from previous months and highlights growing caution among prospective buyers in the current economic climate.
Remortgaging Activity Also Declines
Alongside the drop in purchase approvals, remortgaging approvals—which only include cases where borrowers switch to a different lender—also decreased slightly. The figures show a reduction to approximately 38,100 in January, down from 38,400 in December 2025. This overall slowdown in mortgage activity comes as the housing market faces a mix of challenges, including lingering inflation concerns and geopolitical tensions.
House Price Growth Remains Steady Amid Market Uncertainty
Despite the downturn in mortgage approvals, house price growth has shown resilience. According to Nationwide Building Society, average UK house prices increased by 0.3% month-on-month in February 2026, with an annual rise of 1.0%. The typical house price in February stood at £273,176. However, experts caution that this nominal growth masks underlying issues when adjusted for inflation.
Lucian Cook, head of residential research at Savills, noted, "With nominal house price growth running at just 1.0%, prices are still falling on an inflation-adjusted basis. This is contributing to a gradual improvement in affordability, particularly across London and the south. However, against the current economic backdrop, many prospective buyers remain cautious about taking advantage of that improved position."
Expert Insights on Market Trends
Industry analysts have provided varied perspectives on the market's trajectory. Richard Donnell, executive director at Zoopla, observed, "The latest mortgage approvals data align closely to the overall trends in the housing market with a sustained recovery in sales since 2023 now starting to plateau."
Rob Wood, chief UK economist at Pantheon Macroeconomics, suggested that the disappointing figures might reflect temporary sentiment around the budget, stating, "We are confident that housing transactions will pick up now. Approvals are likely reflecting poor sentiment around the budget with a lag."
Jason Tebb, president of OnTheMarket, pointed to the positive impact of last year's mortgage rate reductions, adding, "Further cuts this year should boost activity and transactions."
Regional and Market Segment Variations
Jeremy Leaf, a north London estate agent, highlighted that buyer nervousness persists despite expectations of declining inflation and mortgage rates. He said, "On the ground the amount of choice, particularly of flats, is encouraging more first-time buyers to transact." However, at the higher end of the market, activity above £1 million remains down 3.2% year-on-year, indicating a slow, bottom-up recovery.
External Factors Influencing the Market
Simon Gammon, managing partner at Knight Frank Finance, warned that external factors could further complicate the outlook. "The outlook for activity and rates appeared relatively benign only last week, but conflict in the Middle East has introduced fresh uncertainty. Any spike in oil prices could fuel global inflation or, at the very least, prompt central banks, including the Bank of England, to delay further rate cuts until the outlook becomes clearer."
Broader Financial Trends
The Bank of England's report also detailed other financial trends. The annual growth rate for consumer credit remained unchanged at 8.3% in January, with credit card borrowing growth slowing slightly to 12.3%. Households increased their deposits with banks and building societies by £4.2 billion, driven largely by a £5.2 billion cash injection into Isas. Additionally, UK non-financial businesses borrowed £7.9 billion net in loans from banks and building societies in January, a significant rise from £1.1 billion in December.
Overall, the housing market is navigating a period of adjustment, with mortgage approvals at a two-year low reflecting broader economic uncertainties. While house prices show modest growth, the combination of inflation, geopolitical risks, and cautious buyer sentiment suggests a challenging path ahead for the UK property sector.
