Mortgage approvals for house purchases in the UK fell to 54,900 in August, down from 55,900 in July and the lowest level since December 2023, according to the Bank of England’s latest money and credit data.
Approvals were also below the average of about 60,100 over the previous six months. The figures marked the fourth consecutive month in which approvals remained below 60,000, according to Lucian Cook, head of residential research at Savills.
The effective interest rate on newly drawn mortgages increased to 4.6% in August from 4.45% in July. The rate reflects the actual interest paid on home loans.
Remortgaging approvals involving a different lender also fell, to 34,000 from 34,600 in July.
Katie Clinton, head of financial services advisory at KPMG UK, said the further fall in approvals indicated that affordability pressures were continuing to weigh on housing demand. She also said the shocks from the Iran conflict were pushing up inflation and mortgage rates.
Matt Swannell, chief economic adviser to the Item Club, said elevated borrowing costs and expectations that the Bank of England could raise interest rates had deterred some buyers. He said quoted rates on new mortgages had risen from around 4% to 5% over the past six months as financial markets shifted from expecting rate cuts to anticipating rate increases.
Swannell said the Monetary Policy Committee was expected to raise Bank rate in November and February, adding that mortgage rates were likely to remain close to 5% for the rest of the year and into the next, weighing on market activity.
Cook said volatility in mortgage markets had made it more expensive for people to take on larger mortgages. He added that upsizers were delaying moves until they had more confidence in their finances and ability to service additional debt.
The Bank of England data also showed that net consumer credit borrowing increased to £2.5 billion in August from £2.1 billion in July. That was above the previous six-month average of £1.9 billion, with borrowing through credit cards and other forms of credit increasing month on month.
Julie Palmer, managing partner at advisory group BTG, said higher consumer credit borrowing could reflect increased spending but might also indicate that more people were using credit to cover essentials because of the rising cost of living.
Households’ deposits with banks and building societies increased by £4.7 billion in August, following net deposits of £3.8 billion in July, the Bank’s data showed.
