BoE mortgage approvals down: "A fiscal fear is forming over the mortgage market"

MORTGAGE approvals for house purchases fell last month with experts warning of “a fiscal fear” forming over the martket.

The number is down by 500 in August, to 64,700, while approvals for remortgaging decreased by 900 in August, to 37,900, according to Bank of England data published today. 

Meanwhile, net borrowing of mortgage debt by individuals decreased by £0.2 billion to £4.3 billion in August, following a £0.9 billion decrease to £4.5 billion in July.

Net borrowing of consumer credit by individuals remained flat at £1.7 billion in August. Within this, net borrowing through credit cards slightly decreased to £0.7 billion in August, from £0.8 billion in July. 

Net borrowing through other forms of consumer credit slightly increased, to £1.0 billion from £0.9 billion.

Andrew Montlake, CEO at London-based Coreco, sounded the alarm for the market.

He said: “A fiscal fear is forming over the mortgage market. The timing of the Budget is not helping activity levels as many people are sitting on their hands and waiting to see what will happen and how any announcements could impact their finances. 

"The danger for anyone waiting is that they are at risk of missing out on a buyers' market now, as house prices have eased slightly and there are a lot of options on the mortgage front. Though the country is in a difficult place economically, lenders have targets to hit and are keen to get the property market moving.”

Emma Jones, Managing Director at Runcorn-based Whenthebanksaysno.co.uk, predicted that mortgage approvals could dip further in the next two months.

She added: "The summer was definitely a tale of two halves. The early summer was relatively busy but the late summer and September have seen caution emerge ahead of the Autumn Budget. 

“Buying or moving home is a huge transaction and many people are unsure about how their finances could be hit by the forthcoming Budget. Mortgage approvals and transaction levels could dip further between now and November, although lenders are doing their level best to keep the market moving.”

Babek Ismayil, CEO at homebuying platform OneDome, said the looming Budget is making potential homebuyers pause.

He continued: "A drop in mortgage approvals in August is not unusual given that a lot of people are on holiday or looking after the kids. September will be the litmus test and determine whether the Budget is causing people to hold back on buying or moving home. 

"Mortgage approvals may be down but they're not out and more and more people are waking up to the fact that it's a strong buyers' market at present. Buyers seeking out a bargain should keep transaction levels moving."

Daniel Hobbs, CEO at Rayleigh-based New Leaf Distribution, agreed, adding: "With household finances under pressure and the wider economy facing no end of headwinds, the mortgage market is muddling along. Despite lender innovation, affordability is still stretched and confidence among borrowers is not exactly high, even though it's a buyers' market. 

“It could be a challenging two months ahead as many people may batten down the hatches ahead of the Budget.”

Samuel Mather-Holgate, Independent Financial Adviser at Swindon-based Mather and Murray Financial, said the government is to blame for the market softening.

He continued: "If you hike up taxes on business and make the economy more uncertain, people have less confidence and the housing market is affected. We live in an economic eco-chamber where all of the Chancellor's decisions come back to personal finances. 

“If you create an environment where investment leaves the economy quicker than UN delegates at a Netanyahu speech, there will be a trickle-down effect that we are now seeing in these figures. Reeves has a month to rethink her assault on business, and it’s one she needs to get right if she wants to keep her job.”

Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, said: "My affiliates in the mortgage sector tell me mortgage approvals increased between June and July, suggesting momentum was building into August. Buyer demand and enquiries increased in August, with residential sales picking up. 

"New buy-to-let mortgages for home purchases rose 60% in the year to Q1 2025, indicating strong landlord interest as yields improve and mortgage rates stabilise. However, like last year, the upcoming Budget appears to be creating market caution with concern around higher taxation and more regulation, creating near-term headwinds for September activity. 

“Market activity typically slows seasonally toward Christmas, but underlying trends suggest resilient demand supported by improving mortgage rates and strong rental yields.”