ONS data shows the UK economy expanded for a second consecutive month in July, but industry figures urge caution over affordability pressures
The UK economy expanded by 0.4% in July, outstripping analyst expectations of stagnation and marking a second consecutive month of growth, according to new data from the Office for National Statistics (ONS).
Services output rose 0.4%, production grew 0.2% and construction added a modest 0.1%, but mortgage and development finance professionals are urging against reading too much into the headline figure.
What does July's growth mean for borrowers?
Richard Pike, sales and marketing director at Phoebus, said the result should not be conflated with a recovery in market conditions for borrowers and lenders.
"While two months of growth is a positive sign, the wider picture remains one of continued uncertainty," he said. "The mortgage market is still operating against a backdrop of affordability pressures, so a return to growth should not be mistaken for a return to normality."
Pike added that lenders would need to remain responsive to the divergent circumstances facing different borrower groups. For those tracking what the trajectory of mortgage rates means for borrowers remortgaging in 2026, the GDP data offers limited near-term comfort.
Ben Jones, senior lead economist at the Confederation of British Industry (CBI), acknowledged the resilience of the July figure but pointed to a tougher second half ahead. Higher household energy bills, volatile energy markets and a global bond-market sell-off were adding to uncertainty and pushing up borrowing costs, he said. Business surveys had become less pessimistic, but the improvement remained tentative.
Construction output: encouragement with caveats
The 0.1% rise in construction output drew a measured response from development finance specialists. Terry Woodley, managing director of development finance at Shawbrook, noted that repair and maintenance remained the primary driver of the monthly uplift, likely reflecting renewed confidence in the Government's housebuilding agenda.
Woodley pointed to the Autumn Budget as the next significant test. Shawbrook's research found that developers were most concerned about a new wave of inflation (73%), rising interest rates (71%) and the availability of development finance (70%). "Developers seeking flexible funding solutions should consider speaking to a broker, as they can advise on the best avenues to help balance business goals with current economic conditions," he said.
Neil Leitch, managing director of development finance at Hampshire Trust Bank, argued that the construction figure reflects decisions made months or years before, and that the policy environment is actively deterring smaller developers from committing capital to new schemes.
"Development has become progressively more complicated and more expensive," he said. "Developers can spend substantial sums getting a scheme through planning before factoring in Section 106, community infrastructure levy (CIL), biodiversity net gain and the additional costs and requirements around building safety."
Leitch noted that mixed signals across the UK economy have already complicated the Bank of England's rate decisions this year, with SME developers growing increasingly selective about which sites they pursue given the uncertainty around planning, costs and delivery.
Is this the beginning of a sustained recovery?
The CBI's Jones said that ahead of the Budget, firms would be looking for how the chancellor's vision to unlock investment translated into action on the cost of doing business, describing it as "essential to turning that ambition into stronger growth and improved living standards."
For Leitch, the path to more meaningful construction output is straightforward in principle, if not in practice. The Government's housing targets are achievable, he argued, but only if the conditions for delivery are addressed directly.
"Simplify planning, properly resource local authorities, reduce unnecessary cost and complexity and give developers some long-term certainty. Do that and there is no shortage of capable developers ready to build."
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