July approvals fall below expectations as economic jitters spread
Mortgage approvals hit their lowest point for over two and a half years in July as lenders pulled back from the market, new Bank of England data shows.
The central bank said on Tuesday that approvals slid to 56,053 in July, below economists’ expectations and the slowest monthly pace since January 2024.
But consumer lending was on the rise, with net unsecured lending jumping by over £2 billion in the largest monthly increase for nearly a year.
July’s figures came in lower than the average number of monthly approvals for the past six months, which the BoE said was around 60,800 mortgages. Remortgaging approvals ticked higher, coming in at 34,500 compared with 34,100 the month before.
The figures reflect a still-sluggish housing market, which has seen activity muted by economic concerns among UK borrowers and interest rate volatility spurred by the US-Iran war.
House prices still eked out growth in August, Nationwide said today, rising by 1.6% year over year to £275,465.
But fears are rising that higher mortgage rates could be on the way in the days ahead because of a recent spike in UK government borrowing costs, which recently hit their highest level since the 2008 financial crisis.
The yield on 10-year gilts surged to an 18-year high this week as financial market jitters spread over global economic risks – potentially putting upward pressure on UK mortgage rates.
Still, while inflation expectations are also increasing as oil prices soar, few see the BoE hiking its own trendsetting interest rate anytime soon.
The central bank is due to meet for its next rate decision on 17 September, but markets have adjusted their timeline for likely BoC rate moves until next year.
On Tuesday, Nationwide chief economist Robert Gardner said a recent energy price cap increase had yet to hit housing market activity.
“While the latest energy price shock poses inflation risks, there have been encouraging signs that it is not feeding through to underlying price pressures,” he said. “Underlying affordability is improving as house price growth remains well below earnings growth, although some of these gains have been offset by higher mortgage rates.”
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