Hopes of a mini recovery in the housing market appear to have been dashed after the latest mortgage approval data showed a slump in the total.

Mortgages agreed decreased to 56,100 in July, down 2,100 from 58,200 the previous month, according to the Bank of England.

The June figure had seen a monthly rise from 56,565, prompting some hopes that the market was picking up.

Net borrowing of mortgage debt by individuals decreased to £4.3billion in July, from £7.7billion in June, below the previous six-month average of £5.3billion.

Approvals for remortgaging increased to 34,500 in July, from 34,100 in June.

The effective interest rate on newly drawn mortgages increased to 4.45% in July, from 4.35% the previous month. The rate on the outstanding stock of mortgages was 3.97% in July, up slightly from 3.96%.

Industry reaction

Anthony Codling, Managing Director of Equity Research at RBC Capital Markets, says: “Mortgage approvals for house purchase fell to 56,053 in July, down 3.7% month-on month and down 15.0% year-on-year.

“It sits 7.3% below the five-year average and 13% below the ten-year average, marking a disappointing retreat from the firmer run-rate we’d grown accustomed to through much of 2024 and early 2025.

“This is a pebble in the shoe for housebuilders who had been cautiously optimistic that demand momentum would hold through the summer. The July figure suggests buyers are pulling back, not what the sector needs as it heads into the all-important autumn selling season.

“However, this weak data may spur the Government on to stimulate the housing market in next month’s budget.”

Jason Tebb, President at OnTheMarket, says: “Approvals for house purchases, a more useful measure of market activity than prices as they indicate future borrowing, fell in July and remain below the previous six-month average as ongoing political and economic uncertainty impacts buyer and seller decision-making.

“With the effective interest rate on newly drawn mortgages increasing to 4.45% in July from 4.35% in June, the impact of higher borrowing costs is also making itself felt. The Bank of England’s decision to hold base rate steady at recent meetings will help steady concerns if this approach continues into the autumn.”

There urgently needs to be stimulus for the housing market.”

Gareth Lewis, Deputy Chief Executive of MT Finance, says: “Earlier this year, approval numbers were picking up quite nicely, before dipping in May and now falling again. We are seeing the ramifications of the unstable interest rate environment and the impact this has on transactions.

“There urgently needs to be stimulus for the housing market, with the new prime minister required to do something to encourage transactions and activity, which will benefit the wider economy. Volatile funding rates are the real issue; while everything pointed towards a lower interest rate environment this year, the impact of war in the Middle East has since changed this outlook.”

Nathan Emerson, Chief Executive of Propertymark, says: “Recent months have seen lower levels of mortgage approvals and lending, reflecting continued pressure on household finances and caution around moving home.

“With the Autumn Budget due next month, many people may be holding back on major housing decisions until there is greater economic clarity, particularly groups such as first-time buyers, for example.

“Across the year, we have seen ambition across all nations regarding the delivery of new sustainable homes, alongside the infrastructure needed to support new developments. As the year draws to a close, it would be encouraging to see mortgage approvals and net lending find a firmer footing. However, this is likely to remain closely aligned with the wider global economy.”