UK mortgage activity steadied in December as house purchase approvals slipped but remortgaging gathered pace the Bank of England’s latest Money and Credit data revealed on Friday.
Net borrowing of mortgage debt by individuals was unchanged at £4.6 billion, pointing to a stable flow of new lending after the volatility seen earlier in 2025.
Gross mortgage lending eased by £0.5 billion to £23.0 billion, while gross repayments fell by £0.6 billion to £18.8 billion, leaving overall net lending flat.
The annual growth rate for net mortgage lending held at 3.4%, reinforcing the picture of a market moving sideways rather than accelerating.
BUYER DEMAND SOFTENING
Net mortgage approvals for house purchase fell by 3,100 to 61,000 in December, suggesting some softening in buyer demand at the end of the year.
By contrast, approvals for remortgaging rose by 1,600 to 38,400, highlighting growing borrower focus on refinancing as rates begin to edge down and more fixed-rate deals approach maturity.
LOWER RATES
Mortgage Soup reported on Friday how the effective interest rate on newly drawn mortgages fell to 4.15% from 4.20% in November, while the rate on the outstanding stock of mortgages ticked up slightly to 3.92% from 3.90%.
Net borrowing of consumer credit fell to £1.5 billion from £2.1 billion, with credit card borrowing down to £0.7 billion. Even so, annual growth in consumer credit remained elevated at 8.2%, with credit card balances growing at 12.4%, close to recent highs.
INDUSTRY REACTION
Simon Gammon, Managing Partner, Knight Frank Finance, said: “Activity in the housing market remained tepid between the Budget and Christmas, even though the measures announced were predominantly positive for the mortgage market.
“The stability of long term borrowing costs following the Chancellor’s speech and increasing competition among lenders paved the way for two months of falling mortgage rates, and the best fixed rates now sit at 3.5%.
“Early year indicators suggest that buyers have returned in greater numbers in the new year. Measures of asking prices and sentiment among estate agents have risen quickly, teeing up a more sustained recovery as we move towards the spring.”
MODEST UPLIFT
Nathan Emerson, CEO of Propertymark, says: “Despite the economy gradually showing signs of improvement, it is disappointing not to see this fully translate into a dynamic housing market quite yet.
“We currently sit in a position where people who are thinking of a house purchase are rightly cautious regarding their finances. It is, however, positive to see a modest uplift regarding remortgaging as 2025 ended.
“For the housing market to deliver sustainable growth, there are many cogs that need to turn in harmony with each other, and although we are certainly seeing encouraging signs regarding the number of properties coming to the market, as well as initial buyer interest on properties – there is a need for overall financial confidence from consumers to for the ‘housing equation’ to fully work.”
POSITIVE IMPACT
Jason Tebb, President of OnTheMarket, says: “Approvals for house purchases – an indicator of future borrowing – fell in December, which could be linked to people putting decisions on hold while they waited for the Budget in late November.
“However, our post-Budget sentiment data shows the market has been far more resilient than many expected.
“Within days, over half of movers reported to be pressing ahead with their plans, with some even accelerating them once the speculation had settled. There may have been a lot of chatter around the Budget, but the clarity we now have has helped steady confidence.
“December’s rate cut also had a positive impact on activity, as has been the case with previous base rate reductions across the year.
“Although the rate on newly-drawn mortgages fell in December, affordability challenges continue. Any interest rate reductions this year will only strengthen the market in the medium term. 2025 was a tough year but the early signs for 2026 are encouraging.”
MARKET ON THE MOVE
Jeremy Leaf, north London estate agent and a former RICS Residential Chairman, says: “In our offices, we have noticed the market is on the move and certainly since a particularly quiet December.
“Mortgage approvals always prove to be a reliable indicator of future market direction but it was no surprise that the Bank of England numbers were a little lower last month bearing in mind the hit to confidence from the Budget uncertainty.
“On the other hand, transaction numbers – also out today – showed that longer-term decision-making was not particularly compromised.
“Looking forward, we don’t expect massive changes as there is too much stock available in most price ranges at present but realistic sellers who price accordingly will notice the difference.”
