Net mortgage borrowing more than doubled in June as the amount of new housing debt taken on by individuals climbed to £7.7 billion, latest figures from the Bank of England revealed yesterday.
The figure increased from £3.3 billion in May and stood well above the previous six-month average of £4.9 billion.
Mortgage approvals for house purchases also edged upwards, reaching 58,200 during the month. However, activity remained below the six-month average of approximately 61,400 approvals.
The figures suggest mortgage completions accelerated during June, although the comparatively subdued approvals data indicates the future sales pipeline remains some way below recent levels.
REMORTGAGE APPROVALS RISE
Approvals for remortgaging with a different lender increased to 34,200, up from 33,800 in May.
The Bank’s approvals measure covers loans agreed for future completion and is therefore regarded as an indicator of housing market activity in the months ahead.
The combination of sharply higher net borrowing and only modestly improved approvals suggests much of June’s lending growth came from transactions already progressing through the system, rather than a major resurgence in new buyer demand.
Housing market affordability has remained challenging, with mortgage pricing affected by changing interest-rate expectations and wider economic uncertainty.
CONSUMER BORROWING INCREASES
Net consumer credit borrowing rose slightly from £1.7 billion in May to £1.8 billion in June, matching its previous six-month average.
Credit card borrowing increased to £900 million from £600 million, while other forms of consumer finance, including personal loans and car dealership lending, fell from £1.1 billion to £900 million.
Households also increased their savings during June, placing £2 billion into Individual Savings Accounts and £1.6 billion into interest-bearing fixed-term deposits.
This was accompanied by £400 million flowing into non-interest-bearing accounts, although households withdrew £1.3 billion from interest-bearing easy-access deposits.
The Bank of England’s latest Money and Credit figures were published ahead of its July interest-rate decision.
INDUSTRY REACTION
Richard Donnell, Executive Director at Zoopla said: “Fewer housing sales being agreed means less demand for mortgages which explains the 10% decline in mortgage approvals on last year.
“Average mortgage rates started the year at 4% and are currently around 4.75% adding more then £1,500 a year to the cost of buying an average priced home.
“Together with the political uncertainty of a new Prime Minister and the distraction of the World Cup, demand to buy homes has slowed. Buyers have plenty of choice of homes to buy and we expect housing sales to end the year 6-8% lower than 2025.”
HEADWINDS REMAIN
Nathan Emerson, CEO at Propertymark, says: “The increase in net mortgage approvals for house purchases increased June suggests that buyers responded positively to a period of relative economic stability. However, approvals remained below the average recorded over the previous six months, indicating that while confidence may be improving, activity has yet to fully recover.
“A consistent Bank of England base rate, competitive mortgage products, easing inflation and a temporary reduction in geopolitical tensions are all likely to have supported buyer confidence during the month.
“As inflation continues to ease, households should benefit from greater financial certainty, making it easier for many prospective buyers to plan ahead, build savings for a deposit and take advantage of more competitive borrowing costs.
“However, there remain headwinds. Inflation is still above the Bank of England’s 2 per cent target ahead of this Thursday’s interest rate decision, while higher household costs, including increased energy prices from 1 July, continue to place pressure on household finances.
“Ongoing uncertainty in the Middle East also has the potential to affect global energy markets and inflationary pressures, meaning affordability will remain a key challenge for many aspiring homeowners.”
RESILIENT MARKET
Jason Tebb, President of OnTheMarket, says: “Approvals for house purchases, a useful measure of market activity as they indicate future borrowing, picked up in June although they remain below the six-month average as ongoing political and economic uncertainty has an impact on buyer and seller decision-making.
“While the appointment of Andy Burnham perhaps adds to that uncertainty, it does give us a Prime Minister for whom housing is near the top of the agenda rather than at the bottom.
“Whether that turns into homes built and problems solved, or just another bold set of promises, is the question that will define his time at Number 10.
“With the effective interest rate on newly-drawn mortgages increasing to 4.35% in May, the impact of higher borrowing costs is also making itself felt. The Bank of England’s decision to hold base rate steady at recent meetings will help steady concerns, particularly if it continues with this approach this month.
“The findings from our own property sentiment index suggest that the market may be more resilient than headlines suggest. Despite ongoing economic uncertainty and fresh headwinds, affordability confidence remains high, with buyers and sellers continuing to engage and adapt. Even in a challenging environment, people will continue to find ways to make their next move happen.”
RETURNING CONFIDENCE
Iain McKenzie, CEO of The Guild of Property Professionals, comments: “The increase in net mortgage borrowing is an encouraging sign that confidence is gradually returning to the housing market, even if buyers remain measured in their approach.
“Mortgage approvals are a useful indicator of future demand, and while approvals for house purchases edged higher in June, they remain just below the recent six-month average, highlighting that buyers are still proceeding with caution.
“After an unusually early summer slowdown, driven by everything from the hot weather to geopolitical tensions and political uncertainty closer to home, the market is entering a more balanced phase. Buyers have more choice than they have had for some time, which means they’re taking longer to make decisions and negotiating harder on price.
“For sellers, realistic pricing has never been more important. Homes that are launched at the right price continue to attract interest, while those that come to market overpriced often require reductions and spend significantly longer on the market.
“With the Bank of England expected to keep rates on hold this week, many buyers will be hoping for greater stability in the mortgage market over the coming months. While affordability remains a challenge, the underlying market remains resilient, supported by people who need to move regardless of wider economic uncertainty.”
SENTIMENT CHANGE
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “The stop-start war in Iran is continuing to have a knock-on effect on mortgage rates and the cost of living compounded by recent domestic political upheaval.
“Therefore, it may be a little surprising that the always reliable indicator of future market activity – mortgage approval numbers – have bounced back, but not to us. On the ground, we’re not seeing a significant change in sentiment. On the contrary, there’s a grim determination among most to stay the course despite some serious price negotiations in many cases.
“However, decision-making has been delayed as genuine buyers take advantage of their considerable bargaining power and ample choice in most price ranges before making their moves.”
SOUND FUNDAMENTALS
Nicky Stevenson, Managing Director of Fine & Country, comments: “June’s mortgage figures suggest the housing market continues to find its footing.
“The rise in net mortgage borrowing shows transactions are still progressing, while the modest increase in mortgage approvals points to a steady flow of future buyers entering the market, even if demand remains below the levels seen earlier this year.
“The current market is very different to the frenetic conditions of recent years. Buyers are spoiled for choice as more homes come to market, giving them greater negotiating power and making them increasingly selective. This means sellers can no longer rely on strong market momentum to achieve ambitious asking prices.
“We’re already seeing the impact of this shift, with Rightmove reporting a fall in the average asking price of newly listed homes in July. Properties launched at realistic, evidence-based prices are continuing to attract interest and agree sales, while those brought to market above their market value often require price reductions and spend considerably longer on the market.
“Although geopolitical tensions continue to weigh on sentiment, the fundamentals of the market remain sound. There is still a significant cohort of non-discretionary movers who need to buy and sell regardless of wider economic conditions, and that continues to provide an important foundation for market activity.”
