Mortgage Approvals Fall to a Two-Year Low as Inflation Ticks Back Up
Bank of England data show mortgage approvals at their lowest since January 2024, just as inflation jumped to 2.9% and Rightmove cut its house price forecast for the year. Here's what's actually moving, and what it means before the Bank's next decision on 17 September.
Key Takeaways
- 1Bank of England data released on 1 September show mortgage approvals for house purchase fell to 56,100 in July, the lowest since January 2024 and 15% down on a year ago
- 2UK inflation rose to 2.9% in July from 2.6% in June, driven mainly by a 14.7% jump in gas prices after Ofgem's price cap changed, making a September rate cut look less likely
- 3Rightmove cut its 2026 house price forecast from 2% growth to a range of 0% to minus 2%, after asking prices fell 2% in August, the steepest August drop since 2018
- 4Remortgage approvals were the exception, edging up to 34,500, as more homeowners lock in a deal before their current fix ends
- 5London saw the sharpest price falls (down 3.1% annually) while the North West was the only region still growing at pace (up 1.9%)
- 6The next test is the Bank's rate decision on 17 September, coming the day after August's inflation figures land
Mortgage Approvals Fall to a Two-Year Low
The Bank of England's monthly Money and Credit release, published on 1 September, showed mortgage approvals for house purchase fell to 56,100 in July. That's down 3.6% on June and the lowest monthly total since January 2024, sitting well below the six-month average of 60,800. Approvals were also 15% lower than the same month a year earlier, when 65,905 were approved.
Gross mortgage lending slipped to £25.9bn from £26.9bn in June, and net borrowing dropped to £4.3bn from £7.7bn, both below their six-month averages too. Propertymark's chief executive, Nathan Emerson, described the trend plainly: recent months have seen lower levels of mortgage approvals and lending, reflecting continued pressure on household finances.
56,100
House purchase approvals, July
-15%
Versus July 2025
£25.9bn
Gross mortgage lending, July
Why Inflation Is Complicating the Bank's Decision
The picture got more complicated on the inflation side too. The Office for National Statistics reported CPI inflation of 2.9% in July, up from 2.6% in June, a bigger jump than most economists had pencilled in. Housing and household services did most of the damage: gas prices rose 14.7% in the year to July, the sharpest gas price rise since October 2022, largely because Ofgem's energy price cap increased that month. Falling fuel prices and cheaper flights to Europe, partly a side effect of reduced airline capacity linked to the wider instability in the Middle East, offset some of that, but not enough to stop the headline rate climbing.
That matters for the Bank's next decision on 17 September. It held the base rate at 3.75% at its last meeting on 30 July, its fifth hold in a row, and three of the nine rate-setters actually voted for a rise to 4%, not a cut. A fresh CPI reading, due out on 16 September, the day before the meeting, makes it harder for the majority to argue for lower rates any time soon.
2.9%
CPI inflation, July (was 2.6%)
3.75%
Base rate, held since Dec 2025
17 Sept
Next MPC decision
House Prices Cool Faster Than Rightmove Expected
The clearest sign that higher-for-longer rates are feeding through is in Rightmove's own index. Average asking prices fell 2% in August, a bigger drop than the ten-year average for the month and the steepest August fall since 2018. That took the average asking price to £364,999, 1% lower than a year ago and the largest annual fall since December 2023.
Rightmove responded by cutting its forecast for the whole of 2026, from 2% growth to a range of flat to a 2% fall. It pointed to three things: an uncertain geopolitical backdrop, rising mortgage rates (its own tracker put the average two-year fixed rate at 5.09% in August, up from 4.92% the month before), and the new Chancellor's first Budget, expected in October. The number of homes for sale is also at a 12-year high for this time of year, giving buyers more choice and sellers less room to hold their price. Land Registry's own index, which lags behind asking-price data because it tracks completed sales, is only just starting to show the same slowdown: the average price paid was £272,188 in June, up just 0.1% on May. Nationwide's figures for July put annual growth at 1.8%, down from 2.2% in June. All three measures are pointing the same way, just at different speeds.
-2.0%
Asking prices, August (month on month)
£364,999
Average asking price
0% to -2%
Rightmove's revised 2026 forecast
A Two-Speed Market
The national numbers hide a sharp regional split. London had its biggest August price fall on record, down 3.1% annually, and now has the widest choice of homes for sale since 2010. Homes there are still 38% more expensive than the South East, the next priciest region. Further north, the picture looks a lot more normal. If you're buying or selling, where you are matters as much as what the national headlines say.
What It Means If You're Buying, Selling, or Remortgaging
Fewer approvals and more homes on the market change the calculation depending on which side of the deal you're on.
If you're buying
Fewer approvals and a 12-year high in homes for sale mean less competition than a year ago. There's more room to negotiate on price, especially outside London and the South East.
If you're selling
Rightmove's own advice is to price competitively from the start rather than testing the market high and cutting later. With stock at a 12-year high, overpriced homes are taking longer to find a buyer.
If you're remortgaging
Remortgage approvals are rising for a reason. If your fix ends in the next six months, line up a new rate now rather than assume cheaper deals are coming, many lenders let you switch to something better later if pricing improves before completion.
If you're on a tracker or SVR
A hold on 17 September leaves your payment unchanged. Build a little headroom into your budget anyway, given three MPC members already want the next move to be up rather than down.
What to Watch Next
Two dates matter over the coming weeks. On 16 September the ONS publishes August's CPI figure; another reading above 3% would make a September cut all but impossible and would keep the pressure on fixed-rate pricing. On 17 September the Bank's Monetary Policy Committee announces its decision, its first chance to react to two months of higher-than-expected inflation. Then, in October, the new Chancellor delivers the first Budget of this parliamentary term, which Rightmove itself flagged as one of the reasons buyers and sellers are holding back until the picture clears.
See what today's rates mean for you
Work out how much you could borrow at today's rates, or compare your current deal against a new one before your fix ends.
This guide is for general information only and does not constitute financial advice. Mortgage Lens is not authorised by the Financial Conduct Authority. Speak to a qualified mortgage adviser before making borrowing decisions.