UK Mortgage Approvals Hit Lowest Level Since December 2023 Amid Affordability Pressures

The UK mortgage market has seen its lowest approval numbers since December 2023, according to the Bank of England's latest money and credit data. In August, there were 54,900 mortgage approvals for house purchases, down from 55,900 in July.

This decline marks a slowdown in demand among home buyers, with experts attributing it to affordability pressures stemming from elevated borrowing costs and inflation. The effective interest rate on newly drawn mortgages increased to 4.6% in August, from 4.45% in July.

Katie Clinton of KPMG UK noted that the fall in mortgage approvals 'continues to weigh on housing demand' due to affordability pressures, while Matt Swannell of the Item Club predicted that the Bank of England could raise interest rates in November and February, keeping mortgage rates close to 5% for the rest of this year.

Remortgaging approvals also decreased to 34,000 in August from 34,600 in July. This suggests refinancing demand softened despite many borrowers reaching the end of their existing fixed term rates.