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Mortgage approvals in the UK fell to 61,013 in December, marking the lowest level since mid-2024, according to Bank of England data. This decline, below economists forecasts, reflects a slowdown in property transactions following the end of a temporary tax break and pre-budget caution over potential higher levies on expensive homes. Annual house price growth remained modest, with Halifax reporting 0.3% and Nationwide 0.6% increases. While early signs show improving buyer sentiment and retail sales were stronger than expected, the low mortgage approvals indicate the housing market may remain subdued in early 2026.
Mortgage approvals in the UK dropped sharply in December, with lenders authorising only 61,013 home loans, the fewest in 18 months. This figure fell below all forecasts in a Reuters poll, which had projected a small rise to 64,800, and followed a downward revision of November's approvals from 64,530 to 64,072. Advertisement
The slowdown in mortgage approvals reflects broader caution in the housing market during the latter part of 2025. The end of a temporary tax incentive for certain property purchases contributed to softer demand, while buyers remained hesitant ahead of the annual budget due to concerns about potential higher taxes on more expensive homes. Simon Gammon, managing partner at Knight Frank Finance, noted that activity remained subdued between the budget announcement and Christmas, despite mostly positive measures.
House price growth remained modest. Halifax reported a 0.3% rise in prices over the year to December, well below the rate of consumer price inflation, while Nationwide recorded a 0.6% increase. Although price gains were limited, the Royal Institution of Chartered Surveyors highlighted early signs of improving buyer sentiment in December, with sales expectations reaching their highest since October 2024. Gammon observed that there were indications of increased buyer activity in January 2026, although the December approvals suggest that transactions will not immediately pick up.
Consumer borrowing remained steady, with year-on-year growth of 8.2%, the fastest pace since May 2024. Lending in December rose by 1.542 billion pounds (USD 2.12 billion), below November's increase of 2.143 billion pounds and lower than the expected 1.7 billion pounds forecast by economists. Meanwhile, retail sales exceeded expectations, posting a 2.5% year-on-year rise, the fastest since April 2025, signaling potential resilience in broader economic activity.
Despite these positive indicators, the low mortgage approval numbers underline ongoing caution among buyers and lenders. The housing market appears unlikely to rebound immediately, even with modest house price gains and encouraging retail trends. Analysts suggest that the pace of recovery in property transactions will depend on the continuation of buyer confidence and lending conditions in early 2026.
Source Reuters
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