UK Mortgage Approvals Fall Slightly in October as Consumer Borrowing Slows

Post by : Saif Nasser

British lenders approved fewer mortgages in October than they did in September, even though the number was still higher than what many experts had predicted. This small drop shows how carefully people in the United Kingdom are making financial decisions during a time of tax changes and economic uncertainty.

According to the Bank of England, lenders approved 65,018 mortgages in October. This was lower than the 65,647 approvals recorded in September and was the lowest number since May. However, economists had expected only 64,200 approvals, so the final figure was slightly better than forecasts. Even with the dip, the market showed a level of resilience that surprised some analysts.

The slowdown came just days after Finance Minister Rachel Reeves presented her new budget, which included higher taxes on expensive homes. These changes created concerns among homebuyers and investors, leading to a more cautious mood in the housing market. Reeves’ tax decisions were part of a broader effort to manage government spending and bring stability to public finances.

The Bank of England also noted that approvals for people wanting to re-mortgage fell sharply. It was the biggest drop since February. Many homeowners who might have wanted to change their mortgage plans held back because they were unsure how the new tax measures would affect them.

Net mortgage lending, which shows how many house purchases were completed, also dropped. It fell to 4.273 billion pounds in October from 5.223 billion pounds in September. This decline suggests that fewer people were finalising home purchases, possibly waiting for clearer signals on future taxes and interest rate changes.

Simon Gammon, managing partner at Knight Frank Finance, said that uncertainty about tax increases and ongoing policy leaks had weakened confidence in the housing market. According to him, these unclear signals made buyers more hesitant. Still, he pointed out that the drop in approvals was small and that monthly activity has stayed close to pre-pandemic levels. This suggests that the market, while cautious, is still active and stable.

Experts also believe that some of the uncertainty is now easing. With the Bank of England expected to cut its base rate in December, borrowing could become cheaper. This may help increase activity in the housing market in the coming months.

The Bank of England’s data also showed that consumer borrowing grew at a slower pace in October. Net consumer credit rose by 1.1 billion pounds, which was below the 1.35 billion pounds expected by economists. It was also lower than the 1.398 billion pounds borrowed in September. Even so, the annual growth rate of consumer credit held steady at 7.2%, one of the highest since late 2024.

This slowdown in borrowing came just before the government’s new tax and spending plan was announced. Many households were already showing signs of caution, with earlier reports revealing drops in retail sales and consumer confidence in October. This means people were spending less and feeling less sure about the economy.

Taken together, the mortgage and borrowing data show that many people in the UK are being careful with their finances. With taxes rising and the economy still uncertain, both buyers and consumers are choosing to wait for clearer signs before making big financial decisions. If interest rates do fall in December, it could give both the housing market and consumer spending a much-needed push in the right direction.