British lenders approved nearly 66,000 mortgages in September, the highest level since December last year, according to new data from the Bank of England that contrasts with signs of caution in the housing market ahead of Rachel Reeves’ autumn budget.
The Bank of England’s Money and Credit report showed mortgage approvals for home purchases rose by 1,000 to 65,900 in September, while approvals for remortgage with a different lender fell by 600 to 37,200.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: “UK mortgage approvals rose in September, showing signs of resilience in the property market despite buyer activity taking a hit amid growing speculation that Chancellor Rachel Reeves will target property taxes in her autumn budget on November 26.
Net mortgage borrowing rose sharply to £5.5bn, up from £4.3bn the previous month, the highest level since March, when borrowing hit £13.2bn. The annual growth rate of net mortgage loans rose from 3% to 3.2%, the highest in almost three years.
The effective interest rate on newly issued mortgages fell 7 basis points to 4.19%, the lowest since January 2023, extending a gradual decline that began in March. Rates on outstanding mortgage balances remained unchanged at 3.89%.
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Haine added: “The property market has been under pressure following the end of the stamp duty holiday in the spring, which saw thresholds return to their previous lower levels, increasing purchase costs for buyers.
“With fears growing that the Chancellor may introduce further property tax reforms, the market is stuttering as buyers and sellers pause (their) moving plans and wait to see what happens.
“Higher purchasing costs have already led to more moderate property price growth, with buyers negotiating more intensely to keep purchases affordable and sellers recognizing that competitive pricing is key to securing a sale. Now, with more property taxes in dispute, uncertainty is rising again, with real estate agents reporting a drop in buyer demand and, in some cases, abandoned sales.”
Among the possible measures, Haine mentioned the so-called “mansion tax” on properties valued at more than £2 million, the implementation of which, he warned, “could prove impractical and expensive”. Other proposals reportedly being considered include capital gains tax on main residences, council tax reform and national rental income insurance.
“A silver lining for buyers is that this uncertainty could help moderate price growth in the short term, particularly at the top end of the market, boosting affordability levels for some,” he said, noting that more competitive mortgage rates and more flexible lending criteria had already improved access to credit.
While the Bank of England remains cautious about cutting rates further, Haine said lower borrowing costs are starting to ease pressure on some borrowers.
“This means that while new borrowers may benefit from lower rates, homeowners exiting historically low fixed-rate deals, secured before interest rates began to rise in December 2021, still face an increase in monthly payments unless they have paid off a significant portion of their mortgage balance,” he said.
Nathan Emerson, chief executive of Propertymark, described the rise in approvals as “an encouraging testament”.
He added: “Many gears need to turn harmoniously when it comes to consumer confidence and affordability and, despite the challenges within the wider economy, it is positive to see people being able to take the next step on the housing ladder more easily.
“However, there are still concerns that need to be acknowledged, such as inflation being close to double what the Bank of England has targeted and the influence this may have on base rate decisions. Despite this, we remain in a much stronger position than at the start of the year, when the base rate was much higher at 4.75%.”
Read more: Barclays cuts mortgage rates as UK buyers face 87-day wait from offer to completion
Richard Donnell, chief executive of Zoopla, said: “Demand for mortgages to purchase homes continues to rise, but at a slower pace as the trailing 12-month rolling total begins to stabilize as home transactions approach their 10-year average of 1.2 million.
“Although budget speculation has affected demand and sales for homes over £500,000, the rest of the market is less affected, which explains the continued demand for mortgages.”
Karim Haji, head of UK and global financial services at KPMG, said: “While mortgage approvals appear to have strengthened, indicating a modest resurgence of activity in the housing market, remortgaging and consumer borrowing have receded. The decline in borrowing suggests many households remain cautious and are prioritizing repayment or savings over new borrowing.
“This also highlights a central tension for lenders: while some segments are beginning to take advantage of housing opportunities, others are still under pressure from rising bills, inflation and rising energy price caps.
“With the autumn budget approaching and speculation continuing around tax and support changes, lenders must engage early with at-risk customers, review affordability models and ensure support channels are well prepared for any changes to household resilience.”
Elsewhere, consumer credit growth slowed in September. Net borrowing fell to £1.5bn from £1.7bn in August, as borrowing through personal loans and car finance fell to £800m from £1bn, while credit card borrowing remained stable at £700m.
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