Mortgage approvals for home purchases fell 15% to 56,200 in May, the lowest level since December 2023.
The latest Bank of England data revealed that net mortgage lending also fell by 34% from £4.4 billion in April to £2.9 billion in May.
May’s figure was below the previous six months’ average of £5.1bn and the lowest monthly total for a year.
Remortgage approvals fell by 34%, from 51,200 in April to 33,300 in May, but this figure does not include product conversions where borrowers stay with the same lender.
Total lending fell slightly to £27.1 billion in May, from £27.4 billion in April, but remained above the six-month average of £25.3 billion.
Repayments increased marginally to £22.9 billion, from £22.6 billion in the previous month.
The Bank of England says the difference between gross lending minus repayments and net lending figures is due to different seasonal adjustment methods.
Damian Burke, head of Broadstone’s regulatory practice, says: “The sharp slowdown in mortgage borrowing and approvals suggests that the surge in activity earlier this year has now faded, with buyers and homeowners taking a more cautious approach.
“Although borrowing costs have declined from recent highs, affordability remains stretched and many potential buyers continue to face rising house prices and broader cost of living pressures.
“For lenders, changing expectations highlight the importance of incorporating forward-looking affordability assessments that better reflect real borrower behavior and lifetime income patterns.
“As caution increases, these more personalized models could help sustain housing demand over the coming months.”
Nathan Emerson, CEO of Propertymark, says: The decline in net mortgage borrowing and lower mortgage approvals reflect the continued caution exercised by many households when making large financial commitments.
“Affordability remains a key consideration for many buyers, and any uncertainty about household finances or borrowing costs can influence purchasing decisions.
“Despite this, there is still underlying demand from people looking to return home.”
“Mortgage rates averaging 5% in April, after starting the year at 4%, has led to a decline in mortgage approvals for home purchases as buyers adopt a wait-and-see approach to mortgage rates that are now falling again,” says Richard Donnell, CEO of Zoopla.
“It appears that agreed sales during the year will be lower than we expected at the start of the year although last year saw a very weak second half as budget uncertainty impacted sales.
“The outlook for the housing sales market in the second half depends on the extent to which mortgage rates decline.”
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