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UK mortgage approvals lowest since December 2023 as borrowing costs rise – business live
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UK mortgage approvals fell to 54,918 in August, the lowest seasonally adjusted level since December 2023, Bank of England data showed. Rising borrowing costs discouraged prospective homebuyers. The decline signaled continued weakness in an already affordability-constrained housing market.
Approvals were below the average of about 60,100 over the previous six months. Without seasonal adjustment, 54,918 was also the lowest since January’s post-Christmas lull. Remortgage approvals fell to 34,000 in August from 34,600 in July, showing that weakness extended beyond new-home purchases.
The effective interest rate on new mortgages increased to 4.60% in August from 4.45% in July. Higher government bond yields during the summer drove the increase. Rising oil prices strengthened expectations of higher inflation and possible central-bank rate increases, contributing to more expensive household credit.
A UK Debt Management Office auction of £4.25 billion in 10-year gilts due 2036 drew an average yield of 5.383%. That was the highest since September 1999. Bids exceeded three times the amount offered, indicating investor demand remained strong but came at a substantially higher return.
Higher gilt yields increase the government’s debt-servicing costs and can feed through to mortgage pricing. The moves therefore connect turmoil in bond markets with pressure on household borrowing and housing activity. They also occur despite signs of economic recovery seen during the year.
Paul Dales, chief UK economist at Capital Economics, said the decline from roughly 56,000 approvals in July was consistent with sharp mortgage-rate increases restraining demand. He noted that house-price inflation had slowed from 1.7% in August and could approach zero within six months. Richard Pinch, senior director at Broadstone, said affordability pressures were “clearly still biting” as households approached winter.
