UK Mortgage Approvals Plummet to Two-Year Low Amid Higher Borrowing Costs

Mortgage approvals for home purchases in the UK fell to their lowest level in more than two years, according to Bank of England figures. In July, there were 56,053 mortgage approvals, down from 58,215 in June and below the six-month monthly average of around 60,800.

The decline suggests that higher borrowing costs and economic uncertainty are weighing on buyer activity, which could put pressure on transaction volumes for estate agents in the coming months.

In contrast, remortgage activity increased to around 34,500 in July, up from 34,100 in June. This indicates that some borrowers are switching lenders to take advantage of lower interest rates.

The latest Nationwide House Price Index showed little movement in property values, with average UK house prices increasing by 0.2% month-on-month in August and annual growth standing at 1.6%. However, experts warn that the increase in fixed-rate mortgage costs is preventing a sustained turnaround in the market.

Lucian Cook of Savills noted that 'underlying affordability' is gradually improving, but that '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'. Hina Bhudia of Knight Frank Finance added that 'we'd need to see those rates fall closer to four before a more sustained recovery takes hold', citing renewed geopolitical tensions and speculation ahead of the Budget as factors weighing on demand.