Key facts
- Bank of England data indicates a 3% rise in net mortgage approvals in June, reaching 58,200.
- Net mortgage borrowing by individuals saw a significant increase to £7.7bn in June.
- Concerns over potential interest rate hikes, driven by energy price volatility, could reverse recent housing market improvements.
- Affordability in the housing market is expected to remain challenged due to elevated mortgage rates.
- Inflation fell to 2.6% in June, but forecasts suggest it could climb, potentially influencing the Bank of England's rate decisions.
Mortgage approvals in the UK saw a modest increase in June, with net approvals rising by approximately 3% to 58,200 from 56,565 in May, according to Bank of England data. Net mortgage borrowing by individuals also climbed to £7.7bn, the highest figure since March 2025 and significantly above May's £3.3bn. Despite this uptick, the figures remain below the six-month average of around 61,400 and April's recent high of 65,900.
However, growing concerns about potential interest rate hikes, fueled by geopolitical tensions and a sharp rise in energy prices, cast a shadow over the property market's recovery. Matt Swannell, chief economic adviser to the ITEM Club, warned that these rate expectations could retract the gains seen in June and keep affordability under pressure. He noted that elevated new mortgage rates are likely to persist, leading to subdued activity in the housing market.
Paul Dales, chief UK economist at Capital Economics, suggested that the rise in net mortgage lending might reflect a backlog of completions from buyers who had secured rates before the recent surge following the Iran conflict. He also pointed to a 5% growth in money supply in June, supporting the view that the Bank of England will maintain its current interest rate of 3.75%.
Some financial institutions, including UBS, anticipate that the Bank of England's Monetary Policy Committee will hold rates steady for the remainder of the year, despite ongoing inflation fears related to oil and gas trade disruptions. Official data released last week showed a drop in inflation to 2.6% in June from 2.8% in May. However, a think tank report on Wednesday indicated that price growth is expected to increase as high as 3.8%, with analysts cautioning that a 4% inflation rate could prompt the Bank to reconsider its interest rate stance.