Mortgage Approvals Rise, but the UK Housing Recovery Remains Uneven
Today’s UK Finance Digest
Mortgage approvals recovered in June and remortgage activity continued to rise, but the latest figures suggest the housing market is stabilising rather than entering a strong recovery. Meanwhile, geopolitical tensions remain a significant risk to inflation, interest rates and the wider UK economy.
Mortgage approvals recover after May’s fall
UK mortgage approvals for house purchases increased by approximately 3% in June, rising from 56,600 to 58,200.
The improvement follows a particularly weak May, but approvals remain below the previous six-month average of around 61,400. This suggests buyer demand is recovering gradually, rather than returning to the stronger levels seen earlier in the year.
Net mortgage borrowing more than doubled from £3.3 billion to £7.7 billion. However, this partly reflects previously approved purchases reaching completion and borrowers refinancing as older fixed-rate deals expire.
Source: Bank of England, Money and Credit – June 2026.
Remortgage activity continues to increase
Approvals for remortgaging with a different lender rose from 33,800 in May to 34,200 in June.
While this represents only a modest monthly increase, refinancing is becoming increasingly important as borrowers reach the end of fixed-rate agreements secured when mortgage pricing was considerably lower.
The effective rate paid on newly drawn mortgages increased from 4.22% to 4.35% during June, highlighting the higher costs facing households taking out new deals.
Source: Bank of England and Financial Reporter.
House prices remain broadly flat
The average UK house price stood at £277,484 in June, compared with £278,024 in May.
Although the headline average declined slightly, Nationwide’s seasonally adjusted index showed prices were effectively unchanged month on month. Annual house-price growth increased from 1.7% to 2.2%.
Regional performance remains uneven. Northern Ireland recorded the strongest annual growth, while London and the Outer South East continued to experience much weaker increases.
Source: Nationwide House Price Index – June 2026.
Housing remains high on the government’s agenda
Prime Minister Andy Burnham has placed housing and regional development among the priorities of the new government.
Initial announcements have included additional funding to address long-term rough sleeping and plans to give local leaders greater powers over housing, planning and regeneration.
These policies could support housing delivery over time, but the immediate property-market outlook will continue to be shaped primarily by mortgage affordability, consumer confidence and the availability of suitable homes.
Source: Prime Minister’s Office and Ministry of Housing, Communities and Local Government.
Bank of England holds rates at 3.75%
The Bank of England has maintained Bank Rate at 3.75%, with six members of the Monetary Policy Committee voting to hold and three supporting an increase to 4%.
The Bank said energy prices remained volatile and above their pre-conflict levels. Although underlying inflationary pressures have continued to ease, uncertainty surrounding oil and refined-energy prices has increased the risk of inflation remaining elevated.
For mortgage borrowers, the decision means there is no immediate increase in Bank Rate. However, lenders may continue adjusting fixed-rate mortgage pricing in response to wholesale funding costs and inflation expectations.
Source: Bank of England, July 2026 Monetary Policy Report.
UK growth forecast upgraded—but risks remain
EY has raised its forecast for UK economic growth in 2026 from 0.8% to 0.9%, following a more resilient-than-expected performance during the second quarter.
Its central forecast assumes the Strait of Hormuz reopens by the end of the third quarter. Under that scenario, the UK economy is expected to grow by 1.2% in 2027.
However, a prolonged closure could reduce growth to 0.5% this year and cause the economy to contract by 0.2% in 2027. Inflation could also reach 6.4% by the end of 2026 under the more severe scenario.
Source: EY UK Economic Outlook, reported by Reuters and City AM.
Equity-release borrowing returns to growth
Equity-release lending reached £597 million between April and June, an increase of 4% from the previous quarter.
Overall customer numbers also rose by 4% to 13,489, while the number of new customers increased by 9% to 5,307.
The figures suggest more homeowners are considering property wealth as part of their retirement planning. However, equity-release products can accumulate significant interest over time and reduce the value of the customer’s estate, making regulated financial and legal advice essential.
Source: Equity Release Council, reported by the Daily Mail.
New rental-home construction falls to a 12-year low
Only 3,455 build-to-rent homes started construction during the 12 months to the second quarter of 2026.
That represents a 79% annual decline and is 80% below the average recorded between 2017 and 2019. Outside London, construction starts fell by 84%, from 13,893 to 2,176.
Real Estate:UK and Savills attributed the slowdown to development viability pressures and uncertainty around issues including rent controls. Although more than 103,000 build-to-rent homes remain in planning, the collapse in new starts could constrain rental supply in the years ahead.
Sources: Real Estate:UK and Savills, reported by The Sunday Telegraph.
The wider picture
The latest figures point to a market that remains active but fragile. Mortgage demand has improved, remortgage volumes are rising and house prices are broadly stable. However, borrowing costs remain elevated, new rental development is slowing and the economic outlook is heavily exposed to movements in global energy prices.
For borrowers, property investors and businesses, the environment continues to favour early planning, careful affordability assessments and access to a broad range of funding options.
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