Mortgage approvals in the UK fell for the third straight month in September, data from the Bank of England shows, pointing to ongoing weakness in the housing market as interest rates stay high.
Home loan approvals dropped to 53,400 in September, down from 54,800 in August and below the six-month average of roughly 58,800, the Bank’s Money and Credit report stated.
New mortgage borrowing also fell, decreasing to £3.9 billion from £4.2 billion the prior month, which is under the six-month average of £4.9 billion. The effective rate on new mortgages rose slightly to 4.63%, while the rate on existing home loans edged up from 4% to 4.03%.
Remortgaging activity, however, saw a notable increase. Approvals with different lenders rose to 42,600 in September, up from 34,000 in August. This indicates homeowners are actively searching for better deals as their fixed-rate periods end.
The housing market is facing pressure from several directions. High inflation and global economic uncertainty are influencing buyer behavior. While the recent Budget announcement offered some stability by lowering government borrowing costs, affordability pressures remain a significant concern for many in the industry.
Simon Gammon, Managing Partner at Knight Frank Finance, linked the slowdown to climbing mortgage rates. He noted that inflation rose to 3.5% in September, and expectations of sustained high energy costs pushed swap rates higher, leading lenders to adjust their mortgage products.
The drop in approvals highlights the tough conditions for new buyers. The current pace is 10.8% below the five-year average and 16.9% below the ten-year average. The value of these approvals fell even more sharply, down 4.9% month-on-month and 17.7% year-on-year to £13.7 billion.
Anthony Codling, MD of Equity Research at RBC Capital Markets, called the three-month decline an “unwelcome hat-trick.” He stated that approvals are now at their lowest level since December 2023.
John Phillips, Chief Executive at Just Mortgages and Spicerhaart, attributed the market slowdown to rate volatility. He described buyers as responding to “global economic storms,” noting that activity is currently driven by those who need to move, rather than those who are choosing to.