MORTGAGE approvals for UK house purchases fell sharply to 54,900 in August, their lowest level since the end of 2023, as experts told Newspage that higher borrowing costs are leaving prospective homebuyers “sitting tight.”
Official figures released today by the Bank of England show mortgage approvals for house purchases decreased to 54,900 in August, below an average of around 60,100 over the previous six months.
Approvals for remortgaging decreased to 34,000 in August, from 34,600 in July. It comes after the effective interest rate on newly drawn mortgages increased to 4.60% from 4.45% in July.
Meanwhile, net mortgage borrowing rose to £4.4billon from £4.1billon, but stayed below the previous six-month average of £5.2billion.
The latest figures show higher borrowing and living costs are continuing to influence prospective buyers in the UK housing market. The August figure was the lowest since December 2023, according to the Bank of England’s latest money and credit data.
Financial experts told Newspage that with interest rates increasing and uncertainty surrounding October’s Budget, many prospective buyers are simply holding off purchasing.
Michelle Lawson, Director at Fareham-based Lawson Financial, said: “August is a traditionally quieter month due to the holiday period. However, with interest rates going through the roof and pre-Budget speculation about changes to the housing market people will naturally hold off for more detail.
Mortgages
“There is activity however we are seeing buyers favour vacant properties due to the complexities of being in a chain now so this won’t help shift the properties at the upper end. Also, with yesterday’s announcement of £18.3m lost in failed property transactions from April to June 2026 alone, there is a greater question of why and how to deal with the root cause of this.”
Although August is typically a quieter month due to the summer holidays, some financial experts say the figures suggest buyers are becoming more cautious as mortgage rates rise, with many reassessing what they can afford before moving home.
Jamie Elvin, Director at London-based Strive Mortgages, said: “August’s fall in approvals looks less like buyers giving up and more like buyers doing the maths. When mortgage rates rise, the same home comes with a higher monthly payment, and some people will pause, lower their budget or stay put. We’re still seeing people who want to move, but they’re more careful about what they can comfortably afford.
Interest
“That affects remortgages too: some borrowers may choose a new deal with their existing lender, which would not appear in the figures for remortgaging with a different lender. One month does not tell us where the housing market is heading, but it does show how quickly higher borrowing costs can take the momentum out of it.”
Despite the figures causing some concern, experts believe there is currently little financial incentive for homeowners to move amid uncertainty over higher interest rates, while first-time buyers are also becoming more cautious about what they can afford to purchase.
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, added: “An inevitable situation, with family holidays shifting focus away from home moves and mortgage rates rising, amid a multitude of threats to our economy and inflationary pressures on the horizon. The property market is flat, if not receding; first-time buyers are more cautious about what they buy, and home movers are aghast at moving costs.
“Downsizers have no financial incentive, so everything eventually grinds to a halt. Government intervention has to benefit all types of buyers, not just FTBs and new-build developers, so changes to Stamp Duty will be more market-friendly and help everyone.”
Harry Goodliffe, Director at Winchester-based HTG Mortgages, thinks the uncertainty surrounding the job market is making first-time buyers question whether they want to take out a mortgage.
Uncertainty
He added: “No one would want to buy a house when they’re worried about keeping their job. That is what this drop is really telling us. People can still get a mortgage; they just don’t trust the country they are borrowing in. Taxes are up, growth is nothing, and every month brings another Government hint about what property owners could face next, so most buyers are sitting tight until the economy settles down.
“You can’t tax and dither your way to a confident housing market. I expect a slow, nervous Autumn and I’m really not sure Westminster has the means to fix it. Speculation will only continue to build until the October Budget.”
However, for remortgage brokers there has been an increase in work. With dozens of buyers refusing to stretch to asking prices, many are deciding to stay put and remortgage, according to Craig Fish, Director at London-based Lodestone Mortgages.
Craig revealed: “I’ve been busier than ever, but much of that is remortgages. Purchase approvals dropped to 54,900 in August, from 55,900 in July and below the six-month average of around 60,100, because there is a disconnect between what sellers want for their property and what buyers are willing to pay. A house is only worth what a buyer will pay for it, and plenty of sellers haven’t accepted that yet.
Market
“Buyers won’t stretch to those asking prices with the effective rate on new mortgages up to 4.60% in August from 4.45% in July, so sales are falling apart over price before a mortgage application is even made.
“What it says about the market is that it’s stuck, and it will stay stuck until sellers price their homes at a level buyers can afford. Until then, purchase numbers will remain low and remortgaging will keep brokers busy. The Bank’s remortgage figure of 34,000 also only counts people switching lender, so a lot of the remortgage work I’m doing doesn’t show up in it.”
Although not everyone is convinced this is a reason to panic. Tracey Dixon, Buy-to-Let Mortgage Specialist & Owner at Cardiff-based Pure Mortgage and Protection, said: “I’m still seeing people who want to buy, but affordability is making it harder for some to move from viewing properties to getting a mortgage approved. Existing debts, changing income and lenders’ different criteria can all affect how much someone can borrow. I wouldn’t read one month’s fall as proof that the housing market has stalled.
Demand
“To me, it shows that buyers need to understand their borrowing position early, before they commit to a purchase. Buyers haven’t disappeared, but affordability is deciding who can move forward. Wanting to buy and being able to pass a lender’s checks are two different things.”
Meanwhile, Elliott Culley, Director at Hayling Island-based Switch Mortgage Finance, admits he’s “not surprised” at the dip in mortgages as the market is “extremely slow.”
He added: “It’s no surprise to see mortgage approvals down. The market is extremely slow at the moment as first-time buyers hold off due to rising interest rates and uncertainty over the economy.”
Richard Davidson, Mortgage Advisor at onlinemortgageadvisor.co.uk, admits the market is quieter but the demand “hasn’t gone anywhere”, with dozens of buyers “sitting on their hands.”
He concluded: “Yes, it has gone quieter, but the demand hasn’t gone anywhere, it’s just waiting. With the average rate on new mortgages rising to 4.6% in August and no clear sense of where it heads next, a lot of buyers are sitting on their hands, and a new Prime Minister with a Budget on the horizon always makes people stop and take stock before committing to something this big.
“What buyers and the industry crave more than anything is stability, and the moment people get a clear sense of direction, I expect that pent-up demand to come back quickly. For those ready to move now, a quieter market is exactly when buyers have more room to negotiate on price, so waiting for perfect certainty could mean missing the better deal.”
