UK Mortgage Approvals Drop to Lowest Level Since Early 2024

UK Mortgage Approvals Drop to Lowest Level Since Early 2024

2026-09-02 global

London, Wednesday, 2 September 2026.
Bank of England data reveals UK home-buyer mortgage approvals unexpectedly fell to 56,053 in July 2026 amid rising borrowing costs, while consumer credit surged past £2 billion.

A Sharp Decline in Housing Demand

The Bank of England’s latest Money and Credit report reveals that lenders approved 56,053 mortgages for house purchases in July 2026 [1][2][3]. This represents a monthly drop of -3.714% compared to the revised June figure of 58,215 approvals [2][3]. The July volume represents the lowest monthly total since January 2024, when approvals sat at 56,032 [1][5]. It also fell significantly short of the 59,500 approvals anticipated by economists in a Reuters poll, as well as the six-month average of approximately 60,800 approvals [1][2][3].

Rising Borrowing Costs Restrict Activity

This contraction in home-buyer demand is heavily tied to the upward pressure on borrowing costs. According to official data, the effective interest rate on newly drawn mortgages rose to 4.45% in July 2026, up from 4.35% in June [4]. Lucian Cook, head of residential research at Savills, noted that a rise in fixed-rate mortgage costs in mid-July prevented improving house price affordability from translating into market activity [1][5]. Additionally, geopolitical tensions and volatile swap rates have continued to weigh on the market, keeping mortgage rates elevated and restricting demand [1][5].

Despite the drop in transactions, property values have shown minor fluctuations. Data from Nationwide Building Society shows the average UK house price rose by 0.2% month-on-month in August 2026 to £275,465, following a 0.1% dip in July [1][5]. On an annual basis, UK house prices grew by 1.6% in the 12 months ending August 2026 [2][3][5]. However, this growth rate remains well below the rate of consumer price inflation, indicating a lack of real momentum in property valuation [2][3].

Borrowers Seek Better Deals Amid Volatility

While new home purchases slowed, remortgaging activity experienced a slight uptick. Remortgaging approvals with different lenders rose to approximately 34,500 in July 2026 from 34,100 in June [1][5]. Mark Harris, chief executive at mortgage broker SPF Private Clients, suggested that this increase shows borrowers are actively shopping around for better rates rather than automatically staying with their existing lenders when their current deals expire [1][5]. This refinancing behavior highlights the consumer effort to mitigate the impact of volatile swap rates [1][5].

Unsecured Consumer Credit Surges as Savings Slow

In contrast to the cooling housing market, UK consumers are increasingly relying on unsecured debt. Net consumer credit borrowing rose to £2.006 billion in July 2026, exceeding the economist forecast of a £1.8 billion increase and marking the largest monthly gain since November 2025 [2][3]. While credit card borrowing fell slightly to £0.9 billion in July from £1.0 billion in June, other forms of consumer credit—such as car finance and personal loans—rose to £1.1 billion from £0.9 billion [5]. Simultaneously, household savings growth slowed significantly, with UK household deposits increasing by £3.8 billion in July, down from a £6.2 billion increase in June [5]. This suggests households may be lowering savings and borrowing more to fund their spending [2][3].

Monetary Policy and Future Outlook

The combination of weak mortgage activity and rising consumer credit presents a complex picture for the Bank of England. Financial markets widely expect the central bank to maintain interest rates at 3.75% during its September 2026 meeting, though a 0.25 percentage point rate hike is still priced in by the end of the year [2][3]. Ruth Gregory, deputy chief UK economist at Capital Economics, noted that the near-term outlook for the housing market remains weak, though overall monetary conditions are not conducive to a long period of high inflation [2][3]. Further out, savers are also preparing for a policy shift in April 2027, when the annual cash ISA allowance for savers under 65 is scheduled to decrease from £20,000 to £12,000 [5].

Sources


Bank of England Mortgage Approvals