UK Mortgage Approvals Plunge as Higher Interest Rates Bite

UK mortgage approvals fell almost 10% in July as higher interest rates made it harder for Britons to afford a home.

(Bloomberg) — UK mortgage approvals fell almost 10% in July as higher interest rates made it harder for Britons to afford a home.

Banks and building societies authorized 49,444 home loans, the fewest since February and down from 54,605 in June, according to the Bank of England. Economists had expected a more modest decline to 51,000.

The figures add to evidence showing the housing market is cooling in the face of surging mortgage costs. Earlier Wednesday, property portal Zoopla said UK home sales are on track to plunge more than 20% this year to their lowest level since 2012.

While mortgage rates are beginning to edge lower, borrowing costs for households remain far higher than they were a year ago. That’s compounding the cost-of-living crisis, with prospective buyers also facing rising rental costs and elevated prices for food and other everyday goods.  

The effective interest rate on new mortgages rose by a further 3 basis points, to 4.66% in July, the BOE said.

What Bloomberg Economics Says …

“Mortgage approvals nosedived by almost 10% in one month as the spike in borrowing costs hit demand in July. We expect elevated interest rates will continue to contain new mortgage applications, weighing on the British housing market ahead.”

—Niraj Shah, Bloomberg Economics. Click for the REACT.

Mortgage approvals are down by more than 30% since August 2022, when house prices peaked following a pandemic-driven boom. 

Shah expects house prices will drop around 10% from that level as the Bank of England continues to raise interest rates in its battle to tame inflation and millions of homeowners are forced to refinance cheap fixed-rate deals at significantly higher rates.

Consumers took out £1.2 billion on unsecured credit such as credit cards, down from £1.6 billion the previous month. They deposited an additional £400 million with banks and building societies, compared to £3.8 billion in June.

Flows were driven by a shift into interest-bearing time deposits as households sought to take advantage of better rates available for tying money up for longer periods. This was mostly offset by outflows from sight deposits. 

–With assistance from Eamon Akil Farhat and Joel Rinneby.

(Adds data on deposits)

More stories like this are available on

©2023 Bloomberg L.P.