UK Mortgage Approvals Fall to Two Year Low as Housing Market Slows in January

Britain’s housing market lost momentum at the start of the year, with new data from the Bank of England showing mortgage approvals fell to their lowest level in two years during January.

The number of mortgages approved for house purchases dropped to 59,999 in January, down from 61,007 in December. The figure was weaker than economists had expected, with forecasts pointing to a modest rise. Instead, approvals reached their lowest point since January 2024, signalling a noticeable slowdown in buyer activity.

Mortgage approvals are widely regarded as a leading indicator for future housing transactions. The decline suggests that elevated borrowing costs and broader economic uncertainty may be weighing on demand.

The total value of mortgage lending, which typically lags behind approvals, also showed signs of moderation. Net mortgage lending increased by 4.076 billion pounds in January, marking the smallest monthly rise since May 2025. In December, net lending had climbed by nearly 4.5 billion pounds.

Despite the softer lending figures, separate data released this week by Nationwide indicated that house prices rose more strongly than expected in February. That survey suggested the property market may be experiencing a mixed pattern, with price resilience in some areas even as mortgage activity cools.

The Bank of England’s report also revealed that net consumer credit grew by 1.8 billion pounds in January, slightly above expectations. The increase in consumer borrowing suggests households may be relying more on unsecured credit, such as credit cards and personal loans, even as mortgage demand weakens.

Economists said the rise in consumer credit points to a pick up in economic activity at the beginning of the year. However, they cautioned that risks remain, particularly from global developments that could influence inflation and interest rate decisions.

The Bank of England recently revised down its growth forecast for 2026 to 0.9 percent, reflecting concerns over weak productivity and external pressures. Inflation is expected to move closer to the central bank’s 2 percent target in the coming months, but policymakers remain cautious about the outlook.

Interest rates were held at 3.75 percent in February, and financial markets currently expect one or two further quarter point cuts by the end of the year. Any delay in easing policy, especially if inflationary pressures rise, could further restrain housing market activity.

With borrowing costs still elevated compared to recent years and consumer confidence uneven, the January figures underline the delicate balance facing the UK property sector as it navigates economic headwinds in 2026.