UK mortgage approvals for house purchases fell to their lowest level since December 2023 in August, according to the Bank of England’s latest money and credit data. Some 54,900 mortgages were approved, down from 55,900 in July, as elevated borrowing and living costs weighed on housing demand.
The figure was below the average of about 60,100 over the previous six months. Remortgaging approvals with a different lender also decreased, to 34,000 in August from 34,600 in July.
Interest rates and market pressure
The effective interest rate on newly drawn mortgages rose to 4.6% in August, up from 4.45% in July, reflecting the actual interest paid on home loans.
Katie Clinton, head of financial services advisory at KPMG UK, said: “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.”
Matt Swannell, chief economic adviser to the Item Club, said home buyers have been deterred by elevated borrowing costs and expectations that the Bank of England could raise interest rates in the months ahead. “The mortgage market has come under significant pressure since the Middle East conflict intensified earlier this year,” he said.
Impact on borrowers and spending
Lucian Cook, head of residential research at Savills, noted it was the fourth consecutive month 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.
Separately, the Bank’s report showed net borrowing of consumer credit increased to £2.5 billion in August from £2.1 billion in July, above the previous six-month average of £1.9 billion. Julie Palmer, managing partner at advisory group BTG, said rising consumer credit could reflect increased spending but also the rising cost of living as more people use credit for essentials.
Households’ deposits with banks and building societies increased by £4.7 billion in August, following net deposits of £3.8 billion in July.
