Mortgage Approvals Plummet to Lowest Level Since Early 2024
New data from the Bank of England reveals a significant downturn in mortgage approvals, with figures for January hitting a two-year low. Net mortgage approvals for house purchases fell to 60,000, marking a six per cent decline from the six-month average of 64,100. This drop represents the lowest total since January 2024, when approvals stood at 55,946.
Budget Speculation Continues to Impact Property Market
Experts attribute the decline to ongoing uncertainty surrounding property tax reforms in the lead-up to the winter Budget. The intense speculation preceding the November Budget has left the property market struggling to recover, with buyers adopting a cautious approach. Jason Tebb, president of property search website Onthemarket, noted that the inactivity and uncertainty before the Budget significantly affected market dynamics.
Post-Budget clarity has since helped steady confidence and given buyers and sellers encouragement to press ahead with their plans, Tebb stated. However, the immediate impact was clear, with net mortgage approvals down two per cent from 61,000 in December. Remortgaging approvals also decreased by one per cent to 38,100 between December and January.
Household Confidence Remains Fragile
Karim Haji, head of financial services at KPMG, emphasized that uncertainty around household budgets is delaying Brits from making housebuying or mortgaging decisions. A softer start to the year for mortgage activity underlines how fragile household confidence remains, Haji explained. January’s data suggests many borrowers are still choosing caution, prioritising financial resilience over major commitments after a costly end to 2025.
Total borrowing by individuals fell to £4.1 billion in January, down from £4.5 billion the previous month. This reduction in mortgage debt further highlights the cautious sentiment prevailing among potential buyers.
Mixed Economic Indicators Emerge
Despite the downturn in mortgage approvals, other economic indicators suggest a tentative rise in consumer confidence. Consumer credit increased by more than expected in January, reaching £1.8 billion. Additionally, the amount of cash in households’ bank accounts rose by £4.2 billion between December and January, although this was below the forecasted £4.5 billion, indicating that Brits are spending more than anticipated.
The annual growth rate of borrowing by large businesses also saw an uptick, rising to 9.4 per cent in January from 7.7 per cent in December. Ruth Gregory, deputy chief UK economist at Capital Economics, commented, January’s money and lending data support other evidence that suggests the economy strengthened at the start of the year.
Potential Risks on the Horizon
However, Gregory also warned of potential challenges ahead. The growing risk is that an inflationary shock from the event in the Middle East limits interest rate cuts and puts a handbrake on growth this year, she noted. This caution underscores the delicate balance between recovering consumer confidence and external economic pressures.
As the property market navigates these uncertainties, stakeholders remain watchful for signs of stabilization. The post-Budget period may offer clearer guidance, but for now, mortgage approvals reflect a market in a state of cautious hesitation, with buyers weighing financial resilience against major commitments.
