UK mortgage approvals fall to lowest level since January 2024 as housing demand weakens

UK mortgage approvals for home purchases hit a new low, highlighting a weakened demand in the housing market amid rising borrowing costs.

Mortgage approvals for house purchases in the UK fell to their lowest level since January 2024 in July, signalling weaker demand in the housing market as borrowing costs continue to weigh on prospective buyers.According to Reuters, citing Bank of England data, lenders approved 56,053 mortgages for house purchases in July, down from 58,215 in June and below the 59,500 median forecast in a Reuters poll of economists. The figure was also well below the six-month average of around 60,800.Higher mortgage costs weigh on buyersThe decline in approvals points to softer housing activity in the months ahead, as mortgage approvals are an important indicator of future property transactions. The figures suggest buyers remain cautious despite modest growth in house prices.Net mortgage borrowing dropped sharply to £4.3 billion in July from £7.7 billion in June, falling below the previous six-month average of £5.3 billion. Gross mortgage lending also declined to £25.9 billion from £26.9 billion.Higher borrowing costs remain a major challenge for buyers. The effective interest rate on newly drawn mortgages rose to 4.45 percent in July from 4.35 percent in June, while the rate on outstanding mortgages edged up to 3.97 percent from 3.96 percent.House prices face pressure as demand slowsThe weakness in mortgage demand comes as house prices continue to record modest annual growth. Nationwide said UK house prices rose 1.6 percent in the year to August, according to Reuters. However, the increase was below consumer price inflation, meaning house prices declined in inflation-adjusted terms.The broader borrowing picture was mixed. Unsecured consumer borrowing increased by about £2 billion in July, above economists’ expectations and the highest monthly rise since November 2025. This suggests households continued to rely on credit for spending even as demand for housing finance weakened.The Bank of England’s interest-rate outlook will remain crucial for the property market. The central bank’s policy rate stands at 3.75 percent, while markets have been pricing in a possible 25-basis-point increase by the end of the year.For the UK housing market, weaker mortgage approvals combined with elevated borrowing costs could keep transactions subdued. If the decline in approvals persists, it could also put further pressure on house-price growth as buyers continue to face affordability constraints.