The latest Bank of England Money and Credit report paints a mixed picture of the UK housing market, highlighting a blend of resilience and hesitation among buyers.
Data released yesterday reveals that in January net mortgage borrowing by individuals climbed to £4.2 billion – a £0.9 billion increase from the previous month.
This suggests that, despite economic uncertainty, there’s still steady demand for property.
However, there are signs that buyers remain cautious. Net mortgage approvals for house purchases edged down slightly, falling by 300 to 66,200.
WAIT-AND-SEE
While not a dramatic shift, it points to a wait-and-see mindset as buyers navigate unpredictable market conditions.
Interestingly, remortgaging activity showed a more positive trend. Approvals for remortgaging rose by 2,200 to 32,900, reversing a two-month decline and this rise may well reflect homeowners locking in deals amid fluctuating interest rates.
Beyond mortgages, consumer borrowing also surged. Net consumer credit borrowing jumped to £1.7 billion in January, up from £1.1 billion in December.
However credit card borrowing spiked to £1.1 billion – the highest monthly increase since November 2023 – a sure sign that some households may be relying more heavily on credit to manage rising living costs.
While mortgage borrowing remains strong, the dip in house purchase approvals and the rise in credit card debt highlight the delicate balance many are striking between ambition and affordability.
INDUSTRY REACTION
Nathan Emerson, Chief Executive of Propertymark, says: “With widespread economic forces impacting the housing market in several ways, we continue to see the likes of inflation and a generally elevated base rates still proving unsettling for some consumers.
“Overall, the housing market is showing an immense degree of resilience, with recent data from our member agents illustrating an almost 40% increase in sales agreed when compared to the same period only twelve months earlier.
“When conditions permit, it would remain welcome news to see the Bank of England have the confidence to further reduce base rates and for lenders to introduce additional products built on more competitive rates.”
DEAMND GROWING
Richard Donnell, Executive Director, says: “The number of approvals for mortgages to buy homes are up 19% over the last year, matching the recovery in all other measures of housing market activity.
“Mortgage demand is back in line with pre-pandemic levels and supporting increased numbers of new sales being agreed. The average mortgage rate for new loans was higher at 4.5%, showing how the housing market has adjusted well to higher mortgage rates over the last two years, with incomes growth working hard to support affordability.
“The latest signs are that demand continues to grow and we expect 5% more home sales than last year with house prices rising 2.5% over 2025.”
AFFORDABILITY CONCERNS
Jason Tebb, President of OnTheMarket, says: “With approvals for house purchases, an indicator of future borrowing, falling only slightly in January after December’s modest uptick, market stability and buyer confidence continues to be steady.
“As the rate on newly-drawn mortgages rose again in January, along with the rate on outstanding mortgage stock, affordability remains a concern for borrowers. Two rate reductions in the second half of last year, followed by one last month is helping but mortgage rates are still higher than many have grown used to in recent years.
“Further reductions from the Bank of England would provide a welcome shot in the arm for the market, particularly with the stamp duty concession ending this month.”
JOB SECURITY ISSUES
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “The housing market is shrugging off concerns with regard to the stamp duty holiday concession ending this month. These figures provide further evidence of the resilience and underlying confidence in home buying, setting the tone for activity over the next few months at least.
“What we have noticed in our offices is more interest in viewing houses – rather than flats – but increasing concerns about job security, inflation and pace of future interest rate cuts. This, along with more choice, has meant protracted negotiations and lengthening transaction times.”
MOMENTUM BUILDING
Stephanie Daley, Director of Partnerships at mortgage advisor, Alexander Hall, says: “Mortgage approval levels have been increasing at a consistently strong rate over much of the last year and we’ve seen buyers push on with their plans to purchase despite mortgage rates remaining stubbornly higher than we’ve become accustomed to.
“Although the latest figures show a marginal decline in January, this is almost certainly a result of the seasonal lull that comes following the Christmas break and the expectation is that mortgage market activity will only strengthen as the year progresses.
“Whilst the impending stamp duty deadline is driving activity to a degree, it’s certainly not the predominant factor fuelling the market at present and, with the Bank of England already reducing interest rates last month, along with a number of lenders launching sub 4% rates for the first time this year, we expect to see further momentum build once the deadline has passed.”
STEADY AS SHE GOES
Mark Harris, Chief Executive of mortgage broker SPF Private Clients, says: “It’s steady as she goes for the housing market with mortgage approvals for new purchases falling very slightly in January.
“The effective interest rate paid on new mortgages rose to 4.51% and since then, we have seen lenders repricing at fairly short notice with the best deals not hanging around for long. With inflation edging up again, hopes of several rate cuts this year have been dented.
“Remortgaging is picking up, perhaps indicating that borrowers are shopping around for a more competitive deal from another lender rather than sticking with their existing mortgage provider.”
GROWING CONFIDENCE
Tomer Aboody, director of specialist lender MT Finance, says: “With approvals showing only a slight fall in January, this further indicates the confidence felt in the market at the start of the year.
“Interest rates may be higher than many are used to but remain at an affordable level compared to 2023, and further indications of further falls in rates to come are fuelling borrower confidence.
“With the looming changes to stamp duty upon us, there is some apprehension about the next few months and how the market will react to the fallout from Reeve’s October Budget. Many are hoping for further rate cuts and/or increased flexibility from lenders, which would help boost activity.”
ON THE FRONT FOOT
Jonathan Samuels, Chief Executive of specialist lender Octane Capital, says: “A momentary monthly dip in mortgage approval numbers is to be expected either side of the Christmas break and so the marginal decline seen in January certainly doesn’t suggest the market is running out of steam.
“In fact, UK homebuyers appear to have begun the year on the front foot and the real indicator of market health is the fact that total mortgage approval numbers have remained above the 60,000 monthly benchmark for a full year now, not to mention they are also up 18.3% year on year.
“Whilst mortgage rates remain a sizable obstacle for many buyers, the general consensus is that affordability should continue to improve as the year progresses, further fuelling the consistent momentum that has been building over the last 12 months.”
