Mortgage activity softened in January with house purchase approvals and net borrowing both edging down despite a further fall in interest rates.
Latest figures from the Bank of England show net mortgage borrowing fell to £4.1bn in January, down from £4.5bn in December and below the previous six-month average of £4.5bn. Annual mortgage lending growth eased slightly to 3.3%, from 3.4%.
Net approvals for house purchases – a key forward indicator for market activity – declined to 60,000 in January from 61,000 in December.
This sits below the recent six-month average of around 64,100, suggesting a modest cooling in buyer momentum at the start of 2026.
MORTGAGE RATES
The effective interest rate on newly drawn mortgages fell to 4.09% in January from 4.15% in December. The rate on the outstanding stock of mortgages also edged down to 3.90%, from 3.92%.
Elsewhere, consumer borrowing remained steady. Net consumer credit borrowing rose to £1.8bn in January, in line with recent averages. Within that, credit card borrowing increased to £0.9bn, while other forms of borrowing such as car finance and personal loans were unchanged at £0.9bn.
PERIOD OF MODERATION
Nathan Emerson, CEO of Propertymark, says: “As we progress further into 2026, we are continuing to see movement across the housing market, though the latest figures suggest a period of moderation rather than acceleration.
“Encouragingly, Propertymark member agents are reporting a near 25% increase in the number of viewings per available property compared to twelve months ago, demonstrating that buyer interest is clearly present.
“However, we are yet to see this heightened activity fully translate into completed transactions, reflecting an evident degree of caution among consumers.
“Although affordability conditions have improved compared to a year ago, many buyers are still carefully assessing their financial position before committing.
“We anticipate confidence will strengthen gradually as stability around borrowing costs continues to filter through, but for now the market is adjusting at a steady and measured pace.”
COMPETITION WILL SUPPORT DEMAND
Richard Donnell, Executive Director at Zoopla says: “The latest mortgage approvals data align closely to the overall trends in the housing market with a sustained recovery in sales since 2023 now starting to plateau.
“Zoopla data shows 8% fewer buyers in the market than last year yet demand for mortgages is just 1% lower than a year ago.
“This is in line with the change in the number of housing sales being agreed which are just 2% down on last year with strong demand from first time buyers supported by the lowest mortgage rates for four years and less onerous assessments of mortgage affordability.
“We believe that strong competition in the mortgage market will continue to support home buyers demand in the coming months.”
CONFIDENCE BOOST
Jason Tebb, President of OnTheMarket, says: “Approvals for house purchases – an indicator of future borrowing – dipped again in January following December’s decline as the inactivity and uncertainty in the run-up to the Budget continued to make itself felt.
“Post-Budget clarity has since helped steady confidence and given buyers and sellers encouragement to press ahead with their plans.
“Last year’s rate reductions had a positive impact on activity, and further cuts this year should boost activity and transactions.
“The rate on newly-drawn mortgages continues to fall, which will help ease affordability challenges.”
BUYERS STILL NERVOUS
Jeremy Leaf, north London estate agent and a former RICS Residential Chairman, says: “Arguably the most interesting of all the monthly housing market reports, mortgage approvals provide a pointer as to activity over the next quarter at least.
“Clearly buyers are still nervous despite expectations that inflation and mortgage rates will continue along a downwards path.
“On the ground the amount of choice, particularly of flats, is encouraging more first-time buyers to transact.”
MIDDLE EAST UNCERTAINTY
Simon Gammon, Managing Partner, Knight Frank Finance, says: “Mortgage approvals fell in January, reflecting the economic uncertainty that lingered after the November Budget and weighed on borrower confidence.
“However, leading indicators published over the past month, including asking prices, suggest activity recovered into February as borrowing costs eased.
“The outlook for activity and rates appeared relatively benign only last week, but conflict in the Middle East has introduced fresh uncertainty.
“Any spike in oil prices could fuel global inflation or, at the very least, prompt central banks, including the Bank of England, to delay further rate cuts until the outlook becomes clearer.”
