Mortgage approvals for house purchases increased to 58,200 in June 2026, up from 56,565 in May, according to Bank of England data. However, the figure remains below the six-month average of approximately 61,435, indicating continued caution in the housing market.
The modest recovery comes amid ongoing geopolitical tensions, domestic political changes, and rising borrowing costs, which continue to influence buyer and seller decision-making across the UK property market.
Market sentiment remains cautious
Jeremy Leaf, north London estate agent and former RICS residential chairman, noted that the conflict in Iran and recent domestic political developments have impacted mortgage rates and living costs. “On the ground, we’re not seeing a significant change in sentiment,” Leaf said. “There’s a grim determination among most to stay the course despite some serious price negotiations in many cases.”
Leaf added that buyers are taking advantage of their bargaining power and the ample choice available across most price ranges before committing to purchases.
Political and economic factors
Jason Tebb, President of OnTheMarket, described mortgage approvals as “a useful measure of market activity as they indicate future borrowing”. He highlighted that ongoing political and economic uncertainty has affected decision-making, though the appointment of Andy Burnham as Prime Minister brings housing closer to the top of the government agenda.
The effective interest rate on newly-drawn mortgages increased to 4.35% in May, according to the Bank of England data. Tebb suggested that the Bank’s decision to hold the base rate steady at recent meetings should help stabilise concerns, particularly if this approach continues.
Affordability pressures persist
Nathan Emerson, Chief Executive at Propertymark, said the increase in approvals suggests buyers responded positively to a period of relative economic stability. He cited a consistent Bank of England base rate, competitive mortgage products, easing inflation and a temporary reduction in geopolitical tensions as factors supporting buyer confidence.
However, Emerson warned that headwinds remain. Inflation continues above the Bank of England’s 2% target ahead of the interest rate decision, while higher household costs, including increased energy prices from 1 July, place pressure on household finances. The ongoing uncertainty in the Middle East also has the potential to affect global energy markets and inflationary pressures.
Sales activity declining
Richard Donnell, Executive Director at Zoopla, explained that fewer housing sales being agreed translates to reduced demand for mortgages, accounting for the 10% decline in mortgage approvals compared to last year. Average mortgage rates started the year at 4% and currently stand at around 4.75%, adding more than £1,500 annually to the cost of buying an average-priced home.
Donnell cited political uncertainty surrounding the new Prime Minister and the distraction of the World Cup as factors that have slowed demand. With buyers having plenty of choice, Zoopla expects housing sales to end the year 6-8% lower than 2025.
Outlook
The June mortgage approval figures suggest a tentative improvement in market activity, though the underlying challenges of affordability, economic uncertainty and geopolitical tensions continue to weigh on the housing market. Industry professionals indicate that while some buyers are proceeding with purchases, decision-making timelines have extended as prospective homeowners navigate higher borrowing costs and assess market conditions carefully.
