Mortgage approvals inch up yet gains to be ‘retracted’
Mortgage approvals rose slightly in June, according to Bank of England data, yet growing fears of a rise in interest rates could set the property market back again.
Net mortgage approvals climbed by around three per cent, from 56,565 in May to 58,200 in June.
That remained below the six-month average of around 61,400, and well short of April’s recent high of 65,900.
Net mortgage borrowing by individuals rose to £7.7bn in June, the highest since March 2025 and far surpassing May’s £3.3bn. The six-month average has been £4.9bn, by comparison.
Nathan Emerson, chief executive of Propertymark, suggested the housing market may not have fully recovered as approvals struggle to return to long-term norms.
Matt Swannell, chief economic adviser to the ITEM Club, warned the breakdown of the US-Iran ceasefire and a sharp rise in energy prices have pushed interest rate expectations back up to the highs seen when the conflict began in late February.
The rise in expectations could once again threaten the housing market and “retract” the gains seen over June.
“With new mortgage rates expected to remain elevated for some time, affordability is likely to remain under pressure and activity in the housing market is likely to remain subdued,” Swannell said.
Mortgage approvals hinge on interest rate decisions
Paul Dales, chief UK economist at Capital Economics, also cautioned that the £7.7bn in net mortgage lending does not signal the housing market is back up
He argued the rise more likely reflects a hump of completions from buyers who locked in mortgage rates before rates jumped following the Iran conflict.
Dales also noted money supply grew by five per cent in June, which he said supports the expectation that the Bank of England will leave interest rates unchanged on Thursday.
Despite continued fears of inflation over oil and gas trade disruption in the Strait of Hormuz, some City giants including UBS expect the Bank’s Monetary Policy Committee to continue leaving interest rates at 3.75 per cent for the rest of the year.
Official data from last week showed inflation dropping in June to 2.6 per cent, having been at 2.8 per cent in the month before.
Price growth is expected to rise as high as 3.8 per cent, a think tank said on Wednesday.
City analysts have warned that if it hits four per cent, the Bank could be prompted to change course on the interest rates.