Britainโs housing market has suffered a fresh blow after mortgage approvals fell to their lowest level in more than two years, signalling renewed pressure on buyers as higher borrowing costs weigh on demand.
The number of mortgages approved for house purchases dropped to 56,200 in May, down sharply from 66,000 in April and below the six-month average of 63,300, according to the latest Bank of England figures.
The decline marks the weakest level of mortgage approvals since December 2023, highlighting growing caution among buyers facing expensive loans and wider economic uncertainty.
Experts said the shock from the escalating Middle East conflict contributed to the downturn, with financial markets reacting to fears over rising energy prices and renewed inflation pressures.
Mortgage lenders responded by pulling some deals and increasing fixed-rate offers as borrowing costs climbed following the outbreak of conflict between the US, Israel and Iran.
The slowdown was also visible in the remortgage market, with approvals for borrowers switching lenders falling to 33,300 in May from 51,200 the previous month.
The figures are being closely watched because mortgage approvals are considered a key indicator of future housing activity, with weaker demand often translating into slower property sales in the months ahead.
The latest setback adds to existing challenges facing the UK housing market, where buyers have been squeezed by years of rising mortgage rates and a higher cost of living.
With households already under pressure, analysts warn that continued uncertainty over interest rates and global events could delay a recovery in property demand.
The Bank of England now faces a difficult balancing act: supporting economic growth while ensuring inflation remains under control as geopolitical shocks continue to affect markets.
Richard Donnell, Executive Director at Zoopla said: “Average mortgage rates hitting 5% in April, having started the year at 4% has led to a decline in mortgage approvals for home purchase as buyers adopt a wait and see approach to mortgage rates which are now declining once again. Sales agreed over the year look set to be lower than we expected at the start of the year although last year saw a very weak second half as Budget uncertainty impacted sales. The outlook for the housing sales market in H2 depends on just how far mortgage rates fall back.
Marc von Grundherr, Director of Benham and Reeves, said:ย โA dip in mortgage approvals shouldn’t be mistaken for a loss of buyer confidence. Fluctuations are inevitable, particularly against a backdrop of ongoing political and economic uncertainty.
The reality is that today’s buyers are far more pragmatic and decisive than they were a year or two ago. Rather than waiting indefinitely for the perfect mortgage rate, many have accepted that the market has stabilised and are moving ahead with confidence. The need to move now outweighs the hope of marginally lower rates.
As long as lenders remain competitive and borrowing costs continue to ease gradually, we expect any slowdown in approvals to prove temporary, with buyer demand remaining resilient through the second half of the year.โ
Verona Frankish, CEO of Yopa, said:ย โA decline in mortgage approvals is unlikely to dampen the wider recovery we’re seeing across the housing market. Monthly variation is expected and the housing market rarely moves in a straight line.
The bigger picture remains encouraging. We’ve seen demand strengthen steadily this year, supported by more competitive mortgage rates and a growing sense of stability. Buyers have become far more willing to press ahead with their plans, recognising that waiting for cheaper borrowing costs may no longer be worthwhile.
While approval numbers may ebb and flow, the underlying market remains resilient. With lenders continuing to compete for business and expectations of further monetary easing still in place, we’re confident buyer activity will remain healthy throughout the second half of the year.โ
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