The UK housing market showed further signs of slowing in August 2026, with mortgage approvals falling to their lowest level in more than two years, according to new data from the Bank of England.

The number of mortgages approved for house purchases dropped to 57,700 in August, down from 61,800 in July. It was the weakest monthly figure since January 2024, suggesting that higher borrowing costs and uncertainty about the economic outlook continue to affect buyer confidence.

Borrowing Costs Remain a Key Concern

Although interest rates have fallen from their previous peak, mortgage affordability remains a major challenge for many households.

The Bank of England has gradually reduced its benchmark interest rate after a period of tightening aimed at controlling inflation. However, many borrowers are still dealing with significantly higher mortgage payments compared with the years of ultra-low rates.

For first-time buyers in particular, rising house prices, stricter affordability checks and the need for larger deposits have continued to create barriers to entering the property market.

The decline in mortgage approvals indicates that some potential buyers may be delaying decisions while waiting for clearer signs about future interest rates and household finances.

Net Mortgage Lending Weakens

The Bank of England data also showed a slowdown in actual mortgage lending.

Net mortgage borrowing by individuals fell in August, reflecting weaker demand for new home loans. While existing homeowners continued to refinance and adjust their borrowing, the overall pace of lending remained subdued.

The figures highlight the pressure facing the UK housing sector after several years of volatility. Higher mortgage costs following the sharp rise in interest rates from 2021 onwards have reduced affordability and contributed to slower activity.

Consumer Confidence Remains Fragile

The housing market is closely linked to wider economic confidence. Uncertainty over employment, inflation and future borrowing costs has encouraged many households to take a more cautious approach.

Potential buyers may be postponing purchases until they feel more confident about their financial position. Sellers, meanwhile, have faced a market where demand is weaker and price expectations have become more difficult to judge.

Despite these challenges, some economists expect housing activity to gradually recover if interest rates continue to decline and mortgage rates become more affordable.

Market Outlook

The latest figures suggest that the UK housing recovery remains uneven. Lower inflation and the prospect of further interest rate reductions could provide support in the coming months, but affordability pressures are likely to remain a major factor.

The Bank of England data shows that the number of approved mortgages has not returned to the stronger levels seen before borrowing costs increased. Instead, buyers and lenders appear to be adjusting to a new market environment where financing is more expensive and decisions are made more carefully.

For households considering moving home, the next stage of the market will depend heavily on the direction of interest rates, wage growth and consumer confidence. While demand has weakened, a gradual improvement could emerge if economic conditions become more stable.