According to data from the Bank of England’s Money and Credit report, the number of house purchase approvals neared the 52,600 seen in December 2023 and fell below the six-month average of 63,300.
Approvals for remortgaging also dropped – from 51,200 in April to 33,300 in May.
Lucian Cook, head of residential research at Savills, said: “After a couple of unexpectedly robust months for mortgage approvals that have sat at odds with other weaker housing signals, May’s figure provides something of a reality check.
“That said, over the past month, we’ve seen competition return to the mortgage market alongside an easing in headline fixed rates, which should relieve some affordability pressure for new buyers.
“This should limit the extent of any associated house price falls, though the wider economic outlook continues to suggest a subdued housing market over the remainder of 2026. Savills forecast expects that mainstream house prices will fall by -2% this year, with growth expected to pick back up again in 2027.”
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Emerging caution among borrowers
Ian Futcher, financial planner at Quilter, said the data pointed to a “clear slowdown in housing activity” through the month, suggesting that demand was being “pushed out as households hold back on making long-term financial commitments”.
Futcher said this was within the context that there was still significant uncertainty around whether there would be a ceasefire in the Iran conflict and the impact of this on the economy, so people were delaying decisions rather than cancelling them.
However, he said affordability was still stretched and timing the market remained difficult.
Borrowers have not withdrawn from the market yet
Simon Gammon, managing partner at Knight Frank Finance, said the market seemed “fairly resilient” in March and April, so May’s data provided the first sign that “a larger number of borrowers were beginning to sit on their hands”.
Despite this, Gammon said conditions had improved since and if the agreement made between the US and Iran in June held, it would set the stage for a market recovery in the autumn.
Nathan Emerson, CEO of Propertymark, said there remained an “underlying demand from people looking to move home” and its members continued to see committed buyers in the market.
He added that more certainty around lending decisions and increased housing supply would be “essential to restoring confidence” and supporting a healthy level of activity in the months ahead.
Gross mortgage lending falls
The value of gross mortgage lending completed in May fell slightly to £27.1bn, compared to £27.4bn the month before. This remained above the six-month average of £25.3bn.
There was a rise in the value of mortgage repayments from £22.6bn to £22.9bn month-on-month, also above the six-month average of £19.9bn.
The net borrowing of mortgage debt declined from £2.9bn in April to £4.4bn in May, falling below the six-month average of £5.1bn and the lowest level of net borrowing since May last year.
The annual growth rate for net mortgage lending rose slightly from 3.3% to 3.4% month-on-month.
Average rates rise
The average rate on newly drawn mortgages rose from 4.08% in April to 4.22% in May, while the average rate on the outstanding stock of mortgages was unchanged at 3.92%.
Jason Tebb, president of OnTheMarket, said the impact of elevated borrowing costs was now making itself felt, as the continuing war “pushed up inflation and energy prices” and “kept the cost of borrowing higher for longer”.
Tebb added: “However, the Bank of England’s decision to hold base rate steady for four consecutive meetings will help steady concerns. And lenders continue to ease mortgage rates, which should improve affordability in the months ahead for those committed to moving.”
