Mortgage Approvals Hit 18-Month Low as Housing Market Stalls

The number of mortgage approvals for home buyers in the UK fell to its lowest level in a year-and-a-half, reaching just 61,013 in December 2025. This figure represents a decline from 64,072 approvals in November, marking the weakest performance since 60,920 approvals recorded in June 2024, according to data from the Bank of England.

Experts in finance and property predict that the housing market may begin to recover as uncertainties surrounding the autumn Budget have been resolved. Thomas Pugh, chief economist at RSM UK, noted that the decline in approvals aligns with sluggish momentum in the housing market during the fourth quarter of 2025. He stated, “The drop in mortgage approvals to 61,013 is consistent with weak momentum in the housing market, which is unsurprising given the uncertainty generated by the Budget.”

Looking ahead, Pugh expressed optimism, suggesting that with recent interest rate cuts and clarity on property taxes, the housing market could regain some momentum this year. He highlighted the potential for pent-up demand due to the previous market slowdown.

Future Projections for the Housing Market

Other analysts echoed this sentiment. Rob Wood, chief UK economist at Pantheon Macroeconomics, believes that mortgage approvals may have reached their lowest point in December or January before beginning to recover throughout 2026. Similarly, Frances McDonald, director of research at Savills, anticipates greater stability in both market activity and prices due to lower mortgage rates and the reduced likelihood of changes to the property tax system.

The Bank of England’s Money and Credit report also revealed a rise in remortgaging, with approvals increasing by 1,600 to reach approximately 38,400 in December. This statistic specifically pertains to remortgaging with different lenders. Mark Harris, chief executive of SPF Private Clients, commented on the lending landscape, stating: “As we move towards spring, the good news for borrowers is that lenders are keen to lend and have the funds available to do so.” He noted that while some lenders have adjusted their mortgage rates, fluctuations are expected rather than significant changes in direction.

Consumer and Business Borrowing Trends

In terms of non-mortgage borrowing, the annual growth rate for consumer credit remained steady at 8.2% in December, unchanged from November. Within this figure, credit card borrowing’s annual growth rate increased to 12.4%, the highest since January 2024. Households also deposited an additional £4.8 billion with banks and building societies in December, a decrease from £8.8 billion in November.

Mark Hicks, director of active savings at Hargreaves Lansdown, explained the trend: “Christmas often takes a bite out of savings, so there’s no surprise that new savings fell back after growing for the previous three months.” He also noted that many individuals withdraw cash to meet tax obligations in January, suggesting this trend may continue before savings levels rebound towards the end of the tax year.

On the business front, UK non-financial firms borrowed a net of £1 billion from banks in December, down from net borrowing of £6.2 billion in November. This data coincides with a separate report from HM Revenue and Customs indicating approximately 100,440 home sales occurred in December, a 5% increase compared to December 2024 but slightly lower than November 2025.

Mortgage expert Karen Noye from Quilter remarked that both the Bank of England’s statistics and HMRC’s transaction data suggest that the housing market is currently in a holding pattern. Despite this, Nicky Stevenson, managing director at Fine & Country, reported solid inquiry levels, particularly when sellers adhere to realistic pricing advice.

She noted, “We are seeing more people looking to sell at the moment, and with greater choice across many parts of the country, buyers have more options than they did in recent years.” Stevenson added that buyers seem willing to act quickly once they identify suitable properties, contributing to sustained transaction levels during what is typically a challenging period for moving.

As the market navigates these fluctuations, many industry professionals remain hopeful for a gradual recovery in the housing sector throughout 2026.