Mortgage approvals declined across the board in October as agreements for house purchase and remortgages both fell.
According to the Bank of England’s Money and Credit report, there were 33,100 remortgages approved in October, a month-on-month decline of 3,600. This was also the lowest figure since February, when 32,000 remortgages were approved.
Mortgage approvals also fell on a monthly basis, totalling 65,000 approvals with a decline of 600.
Budget speculation dampened activity
Industry figures said a slowdown in activity was expected in the run-up to Christmas, and the fall in mortgage approvals was also a sign of consumer hesitancy before the Autumn Budget.
Emma Cox, managing director of real estate at Shawbrook, said: “Mortgage approval figures stalled in October, likely due to a mix of typical seasonal trends as well as reluctance to make any sudden moves until post Autumn Budget.
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“However, looking ahead to 2026, the outlook may be considerably brighter for committed property investors. While the announced 2% tax increase on personal property income is likely to put further pressure on so-called ‘dinner-party landlords’ – those operating small, individual portfolios – the impact on professional landlords should be far more muted.
“As a result, the new tax landscape is unlikely to hinder growth strategies for well-capitalised, business-led landlords who take a long-term, strategic approach to portfolio expansion. In fact, with reduced competition from smaller private landlords and ongoing demand for high-quality rental stock, 2026 could present a more favourable environment for professional investors looking to scale.”
Simon Gammon, managing partner at Knight Frank Finance, said the steady drip of policy leaks before the Budget “weighed heavily on sentiment”, but the fall in approvals was “small”.
Gammon added: “Monthly transaction activity has been broadly in line with pre-pandemic levels since the summer, which is a display of resilience given the weakening economy and the uncertain fiscal outlook.
“Aspects of that uncertainty have now passed, and the Bank of England looks on course to cut the base rate in December. This should allow lenders to keep trimming mortgage rates, and we expect some pent-up demand to be released as we move into a stronger spring selling season.”
Gross mortgage lending falls slightly
The central bank also recorded a minor decrease in the value of gross mortgage lending in October, falling from £24.8bn to £24.5bn on a monthly basis.
By contrast, gross repayments rose by £1.5bn to a total of £22.1bn.
Meanwhile, the net borrowing of mortgage debt by individuals slipped back to £4.3bn, following a rise to £5.2bn in September.
The annual growth rate for net mortgage lending was flat on the month before, at 3.2%. This was the highest rate since January 2023, when it sat at 3.4%.
Affordability improves for new borrowers
The average interest rate on newly drawn mortgages was 4.17% in October, down from 4.19% in September. This was the lowest average rate since January 2023 and continued the downward trend seen since March this year.
The average rate on the outstanding stock of mortgages was unchanged at 3.89%.
Mark Harris, chief executive of SPF Private Clients, said lenders had continued to trim their rates even further since October, but with the average rate of outstanding mortgages staying the same, “affordability remains a concern for many”.
Harris added: “The good news for borrowers is that lenders are keen to lend and have the funds available to do so. Many of the big lenders have reduced their mortgage rates in recent days as they look to pick up more business before the year end.”
Paul Matthews, senior director of risk at Broadstone, said the markets “firmly expect” a rate cut from the Bank of England in December, bringing the base rate below 4%. He said this would boost affordability for homebuyers.
Matthews said: “The worst is also likely to be behind us in terms of further tax-raising measures, which should provide forward stability for financial planning.
“Nonetheless, we are not expecting a significant reduction in rates to pre-pandemic levels, and budget pressures remain tight for millions of households, so lenders will still need to exercise caution around affordability.”
