UK mortgage approvals beat forecasts

UK net mortgage approvals for house purchases—a key indicator of future borrowing—rose to 64,167 in June 2025, up from an upwardly revised 63,288 in May, and significantly above market expectations for a decline to 62,500.

The stronger-than-expected figures add to evidence that the housing market is regaining momentum following the expiration of a homebuyer tax break in April, and suggest that pent-up demand and increased buyer confidence are outweighing the effects of lingering economic uncertainty.

Remortgaging approvals, which include only loans with a different lender, also rose by 200 to 41,800 in June, marking the highest level since October 2022. This trend may reflect a growing effort by households to secure more favorable terms amid falling borrowing costs.

The ‘effective’ interest rate on newly drawn mortgages fell for the fourth consecutive month, declining to 4.34% in June from 4.47% in May, indicating that competitive lending conditions persist even as broader rate-cut expectations have moderated. The decline in new mortgage rates suggests banks are still eager to attract business despite slowing inflation and cautious monetary policy signals.

However, the average rate on outstanding mortgage balances edged slightly higher to 3.88% from 3.87%, pointing to a gradual pass-through of previous rate hikes to existing borrowers and highlighting the continued cost pressures faced by households with variable-rate loans.

Looking ahead, the robust mortgage approval data could factor into the Bank of England’s policy calculus as it balances growth concerns with lingering inflation risks. With consumer credit also showing signs of stabilization and house price indices starting to turn higher, the resilience of the mortgage market may provide some support to the broader UK economy in the second half of the year.