If the housing market feels quieter, it is. Lenders approved 56,053 mortgages in July, down from 58,215 in June. That missed expectations for 59,400 and was the weakest monthly count since January 2024, the third month in a row under 60,000. Nationwide also reported a 0.2% rise in average house prices in August to £275,465 ($373,100), though that follows three monthly declines. Translation: activity is sluggish even as prices flicker higher.
Since the US-Iran war erupted, mortgage costs have climbed and many buyers have paused. Borrowing costs rose after the Bank of England scrapped plans to lower rates this year and warned it might have to lift them, yet officials have lately minimized the likelihood of a bank rate hike. Moneyfacts puts the average two-year fixed mortgage at 5.59%, up from 4.83% just before the conflict began.
Weak approvals hint that price momentum stays fragile. Commenting on July's figure, Ruth Gregory, Capital Economics' deputy chief UK economist, said it "suggests the weakness in the Nationwide house prices announced earlier today will be sustained." She added, "This supports our view that prices will do little more than flatline over the remaining four months of this year." On top of that, households face a fresh squeeze this winter after Ofgem confirmed a 4% rise in the cap on gas and electricity bills from October, while companies are offering smaller pay rises and new jobs are harder to find.
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There are signs of consumer grit, even with the Iran war's energy shock in the mix. Unsecured borrowing rose to £2 billion in July from £1.9 billion in June, beating forecasts for a drop to £1.7 billion. Borrowing on credit cards eased slightly to £900 million. Meanwhile, deposits grew by £3.8 billion, a sharp slowdown from June's £6.2 billion. As Robert Wood, Pantheon Macroeconomics' chief UK economist, put it, households are "smoothing through the drag on real incomes from higher energy prices by raising borrowing." For your wallet, higher mortgage quotes plus pricier energy can eat into monthly cash flow even if home values mostly tread water. The swing factors to watch are mortgage rates, your take-home pay, and how long any extra costs stick around.
