Mortgage approvals for home purchases fell sharply in July to their lowest level in more than two years. The decline adds to signs of subdued activity across the housing market.
The latest Bank of England figures show 56,053 mortgage approvals for house purchases in July. This was the lowest total since January 2024, when 56,032 were recorded.
Mortgage approvals were also down from 58,215 in June. They remained below the six-month monthly average of around 60,800.
The decline suggests higher borrowing costs and wider economic uncertainty are continuing to weigh on buyer activity. Weaker demand could also put pressure on transaction volumes for estate agents in the months ahead.
Remortgage activity moved in the opposite direction. Approvals for borrowers switching to a different lender increased to around 34,500 in July, up from 34,100 in June.
The Bank of England figures come as the latest Nationwide House Price Index showed little movement in property values.
Average UK house prices increased by 0.2% month-on-month in August. This followed a 0.1% decline in July.
The average property was valued at £275,465, with annual house price growth standing at 1.6%.
Lucian Cook, head of residential research at Savills, commented: “While annual house price growth remains marginally positive, prices are still coming down gently on an inflation adjusted basis. This suggests that underlying affordability, as measured by house price-to-income ratios, is gradually improving.
“However, the increase in fixed rate mortgage costs we saw in mid-July, has prevented that from translating into any improvement in activity in the market, leading to a third consecutive month of weak mortgage approvals.
“And with more inflation to work its way through the system, it seems unlikely that we will see much of a sustained turnaround over the course of the remainder of the year.”
Hina Bhudia, partner, Knight Frank Finance, added: “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.”
