The figures from the Bank of England tell the story: home loan approvals have slowed more than one might have expected while consumer borrowing has jumped. It was July’s weakest showing since January, and it portends a difficult couple of months for buyers and lenders alike.
BoE data points to softer housing demand
According to the Bank of England, 56,053 mortgages were given the green light in July. That is the lowest tally since January and did not live up to the 59,500 economists had put on the table.
June’s number was revised up slightly to 58,215 from 58,200 but that does not change the broader downshift. The fact that it missed the mark is an indication of waning purchase activity, any hopes of a summer upturn notwithstanding.
Consumer credit rises as households lean on borrowing
On the other hand, net unsecured lending to consumers was up by GBP 2.006 billion over the month. The rise was the most pronounced since November 2025 and came in above the forecast of GBP 1.8 billion.
One can see a pivot in how households are putting money towards spending in the contrast between the firmer consumer credit and the weaker mortgage side. It also raises questions of affordability when rate expectations are top of mind.
Some key numbers:
– 56,053 for July mortgage approvals
– 59,500 was the economist forecast
– 58,215 for June (revised)
– A GBP 2.006 billion change in net unsecured lending
– GBP 1.8 billion in the unsecured forecast
– $2.71 billion in dollar terms for unsecured lending
Economist view: weak near-term outlook
Ruth Gregory of Capital Economics, the deputy chief UK economist, sees a weak outlook for the housing market in the near term from these latest figures. She suggests some of the spending in July was financed by a lower saving rate and more borrowing.
Gregory would add that monetary conditions are hardly set up for sustained high inflation. In that sense she is in line with the view that policy will be steady if not any looser.
House prices inch up, but trail inflation
There is only modest price growth to be found. Nationwide has house prices up 1.6% in the year to August, well under the pace of consumer price inflation so there is little relief for real affordability.
Sellers could be looking at longer marketing times with demand softening and prices held in check by inflation. Buyers will have to deal with tighter financing and activity may be uneven as the more credit-sensitive make adjustments.
Rates steady for now, with a small rise priced in
The central bank is not expected to budge from 3.75% this month. Markets have already put a premium on a quarter-point hike by year end which is no comfort to those in the market for a mortgage.
It is a balancing act for households between day-to-day credit and larger purchases. Lenders for their part are having to re-prioritise with the mix of slower home loans and faster unsecured growth.
What it means for the months ahead
You have the strongest unsecured lending since November 2025 and the lowest mortgage approvals since January 2024; it makes for a recalibrating market and a wary consumer. Do not expect much momentum in housing transactions until things improve on the affordability front.
All eyes will be on whether approvals put in a stabilisation after July and how pricing in mortgage products reacts. The rest of the year will be shaped by the next rate call and what the inflation and lending prints say.
The message is plain enough: home loan demand has cooled while unsecured borrowing picks up. Absent a change in sentiment, the housing market is in for a slower finish to the year with policy and prices keeping a lid on activity.
